The 1% Market Move: 01/04/2019

The Bottom Line
  • S&P 500 up +3.43%
  • Stoxx Europe 600 up +2.83%
  • Shanghai Composite Index up +2.05%
So What Happened?

The New Year’s party rallied today as almost all major stock indices surged across the globe. In the U.S. the S&P 500 closed up +3.43% and the tech-heavy NASDAQ index closed up +4.26%, gaining back lost ground from yesterday’s shellacking. Markets outside the U.S. also fared well, with Europe and China both raking in over +2% gains on the day (as measured by the Stoxx Europe 600 and the Shanghai Composite, respectively).

The S&P is now up exactly +1% for the year, though it is still notably down ~14% from the record-high realized on 9/20/18.  Likewise, the NASDAQ is now up over 1.5% for the year, but is in a deeper hole than the overall market as it has dropped ~17% since reaching its all-time high in August.

The daily cat & mouse game of conflicting economic reports continues to play out, much to Wall Street and Main Street’s chagrin. It so happened today was a benefactor of positive data –  The Bureau of Labor Statistics reported early this morning that 312,000 jobs were added to the economy in the month of December, crushing expectations.  The same report also noted wages are up over +3% in the past year. Thus it appears today’s employment report is being embraced as a tally in the “no” column in the debate over whether the U.S. is really a part of a shrinking global economy. Yesterday, however, the naysayers appeared victorious as one report indicated manufacturing output in the U.S. is slowing down.

Interestingly, prior announcements of upbeat economic data oftentimes led to downward moves in the market. The reason? A fear that the Federal Reserve would use an expanding economy as justification for raising interest rates to curb runaway inflation. This was not the case today, however, as Fed Chairman Jerome Powell quickly announced this morning that the Fed will be “patient” and flexible when it comes to handling interest rates, giving Wall Street just what it wanted.

Though today’s news dump resulted in widespread jubilation, in our opinion it would be wise to reserve judgment and contain one’s excitement for the time being. There are still pervasive problems in the market that have yet to be resolved – notably, the trade war with China, and now the threat of a prolonged government shutdown and further gridlock in Washington.

Disclosures:

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The S&P 500 is a market capitalization weighted index of 500 leading U.S. companies and one of the most common benchmarks for the broader U.S. equity markets.

The NASDAQ Composite Index measures all NASDAQ domestic and international based common type stocks listed on The Nasdaq Stock Market. Launched in 1971, the NASDAQ Composite Index is a broad based Index. Today, the Index includes over 3,000 securities, more than most other stock market indices. The NASDAQ Composite is calculated under a market capitalization weighted methodology index. To be eligible for inclusion in the Composite the security’s U.S. listing must be exclusively on the Nasdaq Stock Market (unless the security was dually listed on another U.S. market prior to January 1, 2004 and has continuously maintained such listing), and have a security type of either: American Depositary Receipts (ADRs); Common Stock; Limited Partnership Interests; Ordinary Shares; Real Estate Investment Trusts (REITs); Shares of Beneficial Interest (SBIs); Tracking Stocks. Security types not included in the Index are closed-end funds, convertible debentures, exchange traded funds, preferred stocks, rights, warrants, units and other derivative securities. If at any time a component security no longer meets the above eligibility criteria, the security is removed from the Composite Index.

The Stoxx Europe 600 is a subset of the STOXX Global 1800 Index. With a fixed number of 600 components, the STOXX Europe 600 Index represents large, mid and small capitalization companies across 17 countries of the European region: Austria, Belgium, Czech Republic, Denmark, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the United Kingdom.

The Shanghai Composite Index is a market capitalization weighted index made up of all the A-share and B-shares that trade on the Shanghai Stock Exchange. If at any time a component security no longer meets the above eligibility criteria, the security is removed from the Composite Index.

Past performance is not an indication or guarantee of future results. Investing in securities involves risks, including the potential loss of all amounts invested.

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