MARKETS DECLINE AND ENTER CORRECTION LAND WHILE GAS PRICES AROUND THE COUNTRY TREND LOWER

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Weekly Market Update — December 15, 2018

The major U.S. stock markets all finished the week lower and officially entered the land of correction for the first time since February of 2016
The S&P and DJIA lost 1.3% and 1.2%, respectively, while NASDAQ lost 0.8%
The two larger-cap indices – the S&P 500 and DJIA – are both in negative territory for the year, while NASDAQ is barely above the line with a 0.1% YTD return
Trade noise between the U.S. and China continues to be at the forefront of investors' minds and this week brought some hope as Chinese officials signaled changes to economic policies that could increase access for foreign companies
This is on the heels of China’s announcements to buy U.S. agricultural products and reduce the tariff rate on cars imported from the U.S.
The November retail sales report came in stronger-than-expected, but there were some disappointing earnings results, notably Adobe and Costco
Treasury yields and the U.S. dollar were both up, while crude oil and gold prices were down
WTI crude oil fell $1.38 to $51.20 per barrel and the price at the pump for drivers continues to trend lower, as prices in the Midwest fall below $2/gallon

Weekly Market Performance

Global Worries Weigh On Investors

Worries of slowdown in the global economy was a common refrain among market pundits this week and seemed to weigh heavily on the minds of investors. The week started with news that Chinese exports were slowing down and then got worse as negative data out of China continued to be released throughout the week.

Small-Cap Stocks Hit 52-week Low

The two large-cap benchmarks ended the week lower and now reside in the red YTD whereas the tech-laden NASDAQ is clinging to a barely positive 0.1% YTD gain. But the small-cap indices have performed worse than all of them as both the S&P MidCap 400 Index and the Russell 2000 Index hit new 52-week lows.

Eyes On The Fed Again

The Fed meets this week on December 19th and worries about the frequency and speed of short-term rate increases is another thing for investors to fret over. The direction of short-term rates seems to be the only thing not in dispute and the market has priced in an increase to the fed funds rate this week based on employment and inflation data. But for the past few weeks, Fed watchers are talking a lot about concerns that the Fed might overshoot and raise rates too high and too fast.

Oil Prices & Gas

The price of a barrel of oil plummeted from $76 in October 2018 to under $52 this week. And the huge and rapid decline is another thing for investors to worry about. But rather than focus on the negative, there is a silver lining for consumers (and transportation companies): declining prices at the pump.

According to AAA, the national average for a gallon of gas was $2.383 as of December 15th. Further, the national average is cheaper than last week, cheaper than last month and cheaper than last year. And if you drive in the Midwest, you were greeted with prices below the $2/gallon mark.

The Latest Data

Total retail sales increased 0.2% in November, as expected, while retail sales, excluding autos, jumped 0.2%
Industrial production increased 0.6% in November after declining a downwardly revised 0.1% in October
Total business inventories increased 0.6% in October, in-line with consensus estimates
Total business sales increased 0.3% after increasing a downwardly revised 0.3% in September

Sources

aaa.com; dol.gov; sec.gov; census.gov; federalreserve.gov; msci.com; standardandpoors.com; nasdaq.com; dowjones.com; morningstar.com; edwardjones.com; bloomberg.com