US stock markets again swept downward Monday as the volatility of recent weeks resumed ahead of the holidays.
The Dow Jones industrial average opened nearly 300 points down, or 1.1 per cent, extending a slide after a 496-point loss to close Friday.
The blue-chip barometer is notching its worst month in more than three years. By late morning the losses had eased.
The local market has also struggled since October. Fresh falls this week took the NZX-50's returns for 2018 below four per cent, strongly suggesting the decade-long equity boom we've enjoyed is over.
The Standard & Poor's 500-stock index and the tech-laden Nasdaq composite also dropped 0.3 and 0.2 per cent respectively.
The Dow for last week was down 1.18 per cent, the S&P down 1.26 and the Nasdaq down 0.84 per cent. All three indexes - Dow, S&P and Nasdaq - are in correction mode. A correction is a 10 per cent retreat from recent peaks.
Energy is down and health care stocks are down on federal judge's ruling last week saying the Affordable Care Act is unconstitutional. Banks were also down Monday.
The next two or three weeks are historically a happy time for shareholders - dubbed the Santa Clause Rally - as traders finish out one year and reach for optimism to start the next.
For the past five decades, the last week of the year and first couple of trading sessions in January have been a healthy time for stocks, with indexes marking more than 1 per cent gains.
Markets generally languish for a couple of weeks after Thanksgiving as traders sell investments and losers in preparation of the tax season.
Toward the end of December, some stocks may be on sale, causing investors to scoop them up and push indexes higher.
The market is in the throes of a slow-growth narrative that is taking over sentiment. Stocks will need a bump higher these last two weeks to finish in the black. The Dow and S&P are down for the year, and the Nasdaq is hanging in positive territory by less than a percent.
This year may be different as investors factor in the week's anticipated quarter-point interest rate increase by the Federal Reserve, the ongoing US-Chinese trade dispute, low oil prices, a possible US government shutdown and the turmoil surrounding Britain's exit from the European Union.
Trump administration economic adviser Peter Navarro said on CNBC Monday morning that the Fed is the source of volatility and the stock slide.
"The economy is growing without inflation," said Navarro, calling on the Fed not to raise interest rates.
Sam Stovall, chief investment strategist at CFRA, said a slowdown may be in the works, but he does not foresee any recession on the horizon.
"Investors are premature in projecting the start of an economic contraction," Stovall said in a Monday morning note. "We project the S&P 500 to continue its reassessment of its anticipated angle of ascent in the period ahead, but not begin the painful process of preparing for the eventuality of a new bear market."
As for a Santa Rally, well, at least one investor wants more.
"Year-end trading can be slow, as window-dressing can easily take over trades," said Howard Silverblatt of S&P Dow Jones Indices. "At this point the best gift St. Nick can give us is a stable market. Gains would be a nice extra, but less volatility would help support confidence in the market, and permit longer-term investment decision - by investors and corporate planners."
- Washington Post