Investors saw more turbulence this past week as Fed Chair Jerome Powell’s testimony on the economy to Congress was too upbeat in the eyes of some. His remarks of “gradual interest rate hikes” was interpreted as a possibility for four raises this year as compared to three, which has been largely factored in to stock prices. Then President Trump’s decision to place import tariffs on steel and aluminum sent shock waves around the globe by provoking potential trade wars. Finally, when rumors that the Senate may not be able to agree on an infrastructure plan this year, stocks took another 800-point Dow Industrial drubbing on Wednesday and Thursday. A small late-day rally on Friday could do little from keeping major averages from falling 3% (Dow Jones), 2% (S&P 500) and 1% (NASDAQ).
And there was no place to hide with all the market sectors posting losses, let by trade-war sensitive basic materials and industrials falling 4% and 3%, respectively. Despite a small rise on Friday for crude, oil fell $2.30/bbl. taking down energy shares. The S&P 500 is up less than 1% for the year and the Dow is now negative by 0.7%, erasing virtually all the January gains. The economy, however, remains strong as seen by upbeat consumer confidence, positive manufacturing orders and low weekly unemployment claims. And . . .
. . . earnings for the fourth quarter were mostly positive and guidance by companies was enhanced by the new tax reductions on corporate profits, which augurs well for a decent full-year prognosis for equities. Looking ahead, however, volatility is likely to remain high as investors continue to balance the good news on Main Street with concerns about higher interest rates and trade issues on Wall Street.
Here is the answer to last week’s trivia question: The price-weighted Dow Jones Industrial Average is calculated by adding the price of each of the 30 covered stocks and dividing by? 97.85302, 300, 0.145233966877348 or 30. Answer: 0.145233966877348 to account for additions/deletions, stock splits, special dividends and rights offering that have affected the price of the component equities since its founding in 1896.
Today’s Trivia Question: Who is the longest tenured CEO of the Fortune 500 companies? Warren Buffet (Berkshire Hathaway), Leslie Wexner (L Brands), Glen F. Post (CenturyLink) or Stephen A. Schwarzman (Blackstone Group).