The major U.S. stock indexes settled mixed on Friday, ending a tumultuous week which featured volatile price swings in each direction. For the week, the major averages settled at least 2.75 percent higher, posting their first weekly gain in four. Nonetheless, unless the markets post a dramatic recovery on Monday, U.S. stocks will finish their worst December performance since 1931.
In the cash market, the benchmark S&P 500 Index settled at 2485.74, up 3.09 or +0.12%. The blue chip Dow Jones Industrial Average finished at 23062.40, down 76.42 or -0.31% and the tech-based NASDAQ Composite closed at 6584.52, up 5.03 or +0.07%.
The Dow finished lower after giving up early gains. The move was fueled by a mixed performance by its major components. A weaker energy sector drove the S&P 500 lower after the index rose as much as 1.26 percent. The NASDAQ Composite was primarily supported by solid gains in Apple, Amazon and Netflix.
Weekly Rollercoaster Ride
To put this week’s price action in perspective, in just two and a half days, the S&P 500 posted its worst Christmas Eve performance ever, its biggest gain since 2009 and its largest intra-day positive reversal since 2010.
Higher Weekly Close Doesn’t Erase Worries
Despite the higher weekly close, several investor concerns are expected to carry over into the new year. These include fears of a monetary policy mistake by the Federal Reserve, an ongoing government shutdown in Washington and potential signals the global economy may be slowing down. Investors are also eyeing the trade relations between the United States and China as talks continue to move toward the March 1 deadline to strike a trade deal.
Volatility Expected to Continue
Although some investors are blaming this week’s wild price swings on the illiquidity in the market due to the Christmas and New Year holidays, the volatility is likely to continue into next year. The growing uncertainty over whether the US is headed toward a recession, confusing Fed policy, the U.S.-China trade dispute and President Trump’s possible legal problems are major issues weighing on investor confidence.
All three major U.S. indexes posted all-time highs in 2018, however, all are in a position to finish the year lower. This type of dramatic reversal on the yearly charts is pretty rare and is a strong indication that the selling is greater than the buying at current price levels. This type of chart pattern can be indicative of a major top which could lead to a 2 or even 3 year bear market.
With one day to go in the year, the Dow and S&P 500 are on track to post their first yearly loss since 2015. The NASDAQ Composite is on pace to post its first yearly decline in seven years.