The 1% Market Move: 01/15/2019

The Bottom Line
  • S&P 500 up +1.07%
  • Stoxx Europe 600 up +0.35%
  • Shanghai Composite Index up +1.36%
So What Happened?

The S&P 500 inched up +1.07% today, making this just the 3rd +/- 1% move of 2019 and the first one since 1/4/19 when the S&P shot up +3.43%. Thus far the U.S. stock market (S&P 500) is up +4.13% for the year, in what has otherwise been a relatively uneventful start compared to December’s volatility.

Notable headlines today were news out of China that the government plans to implement pro-economic growth measures, and the release of 2018 4th Quarter earnings from several large U.S. banks.

Specifically, the Chinese Finance Ministry announced plans to cut taxes for small businesses and also to increase government expenditures in an effort to boost its decelerating economy. Our readers will recall that concerns over a slowing economy have dragged down Chinese stock markets over the past year (Shanghai Composite Index down –25.21% over the past 12 months), notwithstanding the evolving effects of the trade war. At this point we are roughly halfway through the 90-day truce agreed upon by China and the U.S. on 12/1/18. Though no final concessions have yet to be reached, according to official accounts it at least appears negotiations have been more cordial this time around.

Moving back to the U.S., several large banks such as JPMorgan, Wells Fargo, and Citigroup have posted 4th Quarter figures. Notably, these three major banks all reported upticks in “net interest income” a figure representing the difference between the income it makes off loan interest versus the interest it pays out to savers via savings accounts, money markets, and CDs, etc.  This is attributed to recent actions made by the Federal Reserve – in general as the Fed raises interest rates, banks likewise raise the interest rates they charge consumers to borrow money. Interestingly (and unfortunately) for savers this has yet to meaningfully correlate with a higher interest rate these banks pay consumers to deposit money with them, hence the overall increase in profitability for the banks.

Two weeks in to the new year we have yet to see conclusive answers on unresolved issues such as the trade war, the U.S. government shutdown, and the path of interest rates. As we have said before, we anticipate the market will be sensitive to any new developments in these areas, although overall the U.S. economy still appears strong by most conventional measures.

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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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