A 333-point gain in the Dow Industrials at week’s end could not undue overall selling pressure at the start of the week. The major averages were negative by about 2%, although small and mid-cap stocks held up somewhat better. There wasn’t a positive market sector to be found this week. Energy stocks took the biggest hit, giving back 3.3% on average as oil prices continued to fall and the current spot price is now in bear market territory. West Texas crude settled on Friday at $56.83/bbl., $3.33 cents lower than last week’s close. Brent crude is now $66.76/bbl. compared to $86 six-weeks ago. The usual culprit for such weakness is often demand, but there are major changes going on in the supply side with OPEC reducing output, Iranian sanctions (both positive for higher prices), not able to offset a full-tank of domestic shale oil. Consumer discretionary, health care and technology stocks were also lower by two percent or more. The only bright spots were a rise in gold prices to $1,220.80/oz, up $14.40 on the week and the Dow Transports ticking higher on those lower fuel costs.
The negativity centers around the same old issues: China trade, interest rate hikes and a potential for a global economic slowdown. A truce with China pops up now and then but nothing has been finalized. Most likely the Federal Reserve will raise rates once again at its December meeting and three more hikes are in the cards for next year taking short-term rates to 3%. The results of the mid-term election with the democrats gaining control of the House also signals some uncertainty, which Wall Street tends to shun. Politics aside, the U.S. business outlook remains bright, with most companies continuing to outperform expectations and the economy, which remains on a relatively fast track, likely to advance at a generally healthy pace in the current quarter and into 2019.
The unsettled trading pattern we’ve seen lately will probably continue as traders sell into any rally and buyers are reluctant to commit funds on subsequent sell-offs. While it is virtually impossible to time the market, caution remains a prudent stance until such time the technical picture for equities improves. However, a diversified portfolio of high-quality, dividend growing stocks along with select sector funds should continue to pay off over time.
The stock market will be closed on Thursday in observance of Thanksgiving and close early on Friday. Enjoy the holiday weekend.
Here is the answer to last week’s trivia question: In 2010, Google made an offer to buy what then private company for nearly $6 billion, but was turned down? Snap, GoPro, Fitbit or Groupon. Answer: Groupon, which went public a year later.
Today’s Trivia Question: Office printer and copier company Xerox Corp., founded in 1906 in Rochester, New York, began life as? The Land Corp., Dataproducts, Inc., The Haloid Photographic Co. or Harris-Intertype Corp.