There was just too much negative news around this week to help equities: Tariffs and potential trade war fears; more-than-expected interest rate hikes next year; continued White House personnel turnover; a Facebook security scare; and surmounting negative market technicals. Hence, for the week, stocks headed lower by about 6%, with the Dow’s biggest weekly decline in more than two years. Small and mid-cap stocks did slightly better with losses in the 5% range. And despite a $3.54/bbl. gain in West Texas crude futures, energy stocks – the best performing sector – could not make it into positive territory, shedding about 1%. While safe-haven consumer and utility stocks were among the least hardest hit, they were overshadowed by a nearly 8% decline in technology, while healthcare and financials suffered 6.6% and 6.4% losses, respectively. Counter-measure gold climbed $38/oz. to settle at $1,349.30.
The President targeted China in his pursuit to even trade imbalances to the tune of $60 billion. Without naming specific products, the U.S. will evoke tariffs on select items from the world’s second largest economy, who retaliated with $6 billion in tariffs on some 128 U.S. import products including fresh and dried fruits, nuts, wine and some manufactured steel items. The Federal Reserve ended its FOMC meeting by voting to raise the fed funds rate another quarter point, with three more planned for this year and the possibility of three in 2019 and more to come in 2020. The Fed sighted a strengthening economy and a lower unemployment rate for the year, while inflation appears to be under control.
Stock market volatility remains high, in part due to these domestic and international pressures. Moreover, market swings probably will continue for a while, keeping anxiety levels high, even if an upward trend in equities is re-established. Investors are hesitant to commit new funds at this juncture and, thus, any positive news and subsequent stock price increases is followed by selling pressure, as traders wait for the next shoe to drop. While earnings are predicted to be strong over the course of the year, some industries will suffer from tariff headwinds and, thus, selectivity remains key.
Here is the answer to last week’s trivia question: M&T Bank Corp. was founded in 1856 in Western New York. The “M&T” stands for? Monetary & Trust Bank, Manufacturers and Traders Trust, Maxwell and Tyler or Metropolitan and Tioga Bank. Answer: M&T Bank Corp. is a holding company for its two principal subsidiaries – Manufacturers and Traders Trust and Wilmington Trust Corp.
Today’s Trivia Question: Chunky candy bar, originated in New York City around the late 1930’s, is now a product of? The Hershey Co., Tootsie Roll Industries, Mars, Inc. or Nestle, SA.