Monday, December 31, 2018
Global stocks are higher across the board on this final day of trading in 2018, helped after President Donald Trump reported “big progress” in trade talks with his Chinese counterpart, but stocks are set to close out the year lower and on track for their worst year since the financial crisis while oil is mired in its steepest quarterly slump since 2014. Last week, the S&P 500 logged a 2.9% rise, while the Dow rose 2.8% and the Nasdaq rallied 4%. However, for the year, the Dow is looking at a drop of 1,656.82 points, or 6.7% for 2018, its biggest one-year point and percentage decline since 2008, while a quarterly loss of 12.83% is the worst since the first quarter of 2009. A monthly loss of 9.7% makes it the worst December since 1931. The year is also shaping up as the worst since 2008 for the S&P 500, down 7%, and the Nasdaq Composite, off 4.6%. A U.S. government shutdown also remains an issue, moving into day 10 and set to stretch into the New Year with both sides at a stalemate over border-wall funding. In Asian markets, The Nikkei Index was closed as the Hang Seng Index rose 341 points to 25,845. In Europe, the German DAX was closed while the FTSE 100 is little changed at 6,740.
Heading into 2019 there are plenty of market risks that remain including slowing growth concerns, fears that a trade dispute between the U.S. and China, along with tighter Federal Reserve monetary policy, will weaken global fuel demand (as oil prices fall over 20% this year), the U.K.’s exit from the European Union, the ongoing showdown between President Trump and Congress over the budget. The American political landscape is also unsettling following departures of senior officials and Trump’s repeated criticism of Federal Reserve Chairman Jerome Powell. Overall stock news flow is quiet heading into New Year’s Eve (markets are open normal time today but are closed tomorrow).
Market Closing Prices Yesterday
· The S&P 500 Index slipped -3.09 points, or 0.12%, to 2,485.74
· The Dow Jones Industrial Average fell -76.42 points, or 0.33%, to 23,062.40
· The Nasdaq Composite gained 5.03 points, or 0.08%, to 6,584.52
· The Russell 2000 Index advanced 6.11 points, or 0.46% to 1,337.92
· 10:30 AM EST Dallas Fed Manufacturing Activity for December…est. 15.0
· China’s official gauge of factory activity fell, indicating a contraction in December, hitting its lowest level in more than two years. The official manufacturing purchasing managers’ index dropped to 49.4 in December from 50.0 in November, and well short of a forecast of 50.0
· A sub-index for China total new orders fell into a contractionary territory of 49.7 in December, the lowest level since February 2016, while the production sub index dropped sharply to 50.8 from 51.9 in November.
· British lawmakers plan to force a Brexit delay if Prime Minister Theresa May’s deal fails to get approved by Parliament in January, the Observer reported Sunday. The newspaper reported that senior members of both the Conservative and Labour parties plan to force the March 29 deadline back until July, at the latest, in order to avoid a no-deal Brexit that could be an economic catastrophe. May’s deal is expected to be rejected.
Sector News Breakdown
· Sears Holdings Corp Chairman Eddie Lampert submitted a $4.4 billion takeover bid for the bankrupt U.S. retailer, representing its only chance of escaping liquidation
Energy, Industrials & Materials
· Oil headed for its first annual loss since 2015, slumping more than 24% in a turbulent year that saw fears of supply scarcity turn to expectations of a surplus. WTI crude has also plunged 38% this quarter, the worst in four years
· China will restrict imports of scrap steel and aluminum from July 1, the environment ministry said
· The Texas judge who ruled Obamacare unconstitutional earlier this month agreed Sunday to stay his decision from taking effect until it can be appealed. Federal Judge Reed O’Connor said he didn’t believe 17 state attorneys general, led by California’s Xavier Becerra, would prevail in their challenge of his blockbuster ruling.
· A December 17 report in the Journal of the American Medical Association-Internal Medicine finds suggestive evidence that doctors misdiagnose patients to justify useless, but lucrative, procedures, that can enrich doctors, hospitals, and stent manufacturers-an industry that includes Abbott Laboratories (ABT), Boston Scientific (BSX), and Medtronic (MDT), in this week’s edition of Barron’s
· Fresenius Medical Care (FMS) is still in the process of seeking approval by U.S. FTC for acquisition of NxStage Medical (NXTM) – Bloomberg
Technology, Media & Telecom
· A lawsuit filed against Google (GOOGL) by users who said the world’s largest search engine violated their privacy by using facial recognition technology was dismissed by a judge on Saturday.
· China on Saturday approved the release of 80 online video games after a freeze on such approvals for most of the year. However, the approved titles, listed on the website of the State Administration of Press, Publication, Radio, Film and Television, did not include games from industry leader Tencent Holdings Ltd (TCEHY)
· Cognex (CGNX) mentioned positively in Barron’s saying with shares down nearly 40% year to date, it might be time to take a closer look at the stock, Al Root writes in this week’s edition of Barron’s. Corporate culture is key at Cognex, but that is not the only thing that makes the company unique, the report says, noting that its gross margins of more than 75% are more comparable to a software company than industrial peers with gross margins around 30%. For the past five years, the company’s revenue has grown more than 17% a year, and analysts expect revenue to climb 14% on average for the next two years, the publication adds. Reference Link
· Disney (DIS) mentioned positively in Barron’s saying shares could be a “good deal” for long-term investors as the company builds a streaming content service with the aim of rivaling Netflix (NFLX) citing a recent valuation of 15 times projected earnings for the next four quarters, down from 20 times in August 2015.
· The New York Yankees are in talks with Amazon.com Inc. (AMZN) and Sinclair Broadcast Group Inc about a joint bid for the team’s regional sports network, Yes, the Wall Street Journal reported on Friday. The baseball team, which owns 20% of Yes, has also been talking to other potential partners, including cable and satellite TV provider Altice USA and RedBird Capital, about buying the remaining 80% stake from Walt Disney Co (DIS)
· A cyber-attack caused major printing and delivery disruptions on Saturday at the Los Angeles Times and other major U.S. newspapers, including ones owned by Tribune Publishing such as the Chicago Tribune and Baltimore Sun, according to Reuters