U.S. stocks closed higher Tuesday in a session that saw the Dow swing more than 400 points, with a crucial policy announcement set for Wednesday from the Federal Reserve.
How did the benchmarks perform?
The Dow Jones Industrial Average DJIA, +0.35% edged up 82.66 points, or 0.4%, at 23,675.64, while S&P 500 index SPX, +0.01% rose less than a point to close at 2,546.16. The Nasdaq Composite Index COMP, +0.45% climbed 30.18 points, an ascent of 0.5%, to 6,783.91.
All three benchmarks closed off their early morning highs, when the Dow climbed as high as 335 points, the S&P 28 points, while the Nasdaq rose 83 points, at its highest.
At its lows, the Dow fell as much as 77 points, the S&P 17 points, while the Nasdaq fell 20 points, at its lowest.
What’s drove the market?
Volatility continued to plague stock markets Tuesday, as fears that sluggish global growth will wash up on U.S. shores continued to unsettle investors, and as uncertainty surrounding U.S.-China trade relations and Fed interest rate policy convince many investors to remain on the sidelines.
Another day of tumbling oil prices only helped to reinforce fears of slowing global growth, as U.S. crude prices fell 7% to their lowest level in nearly 16 months, while equity traders struggled to understand how much of the fall is due to oversupply versus falling demand abroad.
Traders are hopeful, however, that the Federal Reserve will provide solace to investors in the waning days of 2018, as the central bank’s interest-rate setting committee, the FOMC, began its final meeting of the year Tuesday and will announce its decision on whether to raise interest rates Wendesday at 2 p.m.
CME Group data, gauging Federal-funds futures, indicate an 83.8% likelihood that the Fed will raise rates at least 0.25% Wednesday, even as prominent voices, including the Wall Street Journal’s editorial page, called for the Fed to pause amid signs of slowing economic growth.
President Donald Trump has also been a consistent proponent of halting interest-rate increases, and he took to Twitter again Tuesday morning to promote the Journal editorial.
Potentially more important that the decision to raise rates will be Fed’s communication strategy, including the statement it issues to accompany the interest-rate decision, as well as a news conference at 2:30 Wednesday, where Federal Reserve Chair Jerome Powell will discuss future interest rate hikes.
Meanwhile, Chinese leader Xi Jinping, speaking at an event to commemorate the 40th anniversary of China‘s economic reforms, called for China to “stay the course” on economic reforms, adding a defiant note that “no one is in a position to dictate to the Chinese people what should or should not be done,” an apparent reference to the continuing tariff spat between Beijing and Washington, led by President Donald Trump’s administration.
What are analysts saying?
Larry Benedict, CEO of the Opportunistic Trader told MarketWatch that Tuesday’s marginal recovery could be short lived. The current downtrend “has a lot further to go,” he predicted.
According to Benedict, whatever relief the Fed may provide markets tomorrow will be overwhelmed in the final trading days of 2018 by other factors, like extremely negative sentiment, tax-motivated selling, and a “triple witching” day coming later this week, when contracts for stock index futures, stock index options, and stock options all expire on the same day, which will force traders to close out positions and will raise stock market volatility.
A worsening global economy is another reason that markets continue to struggle for altitude. The S&P 500 is “only down 7% on the year. Markets abroad are down twice that or more,” Benedict said. “We’re the only market that hasn’t gotten annihilated.”
“Today feels like one of those oversold bounces,” Yousef Abbasi global market strategist with INTL FCStone told MarketWatch.
Stocks may have drifted higher Tuesday, “but in terms of the broader outlook, it is hard to imagine this market rallying with any sort of fervor and retaining those gains,” he said, because there is just too much uncertainty regarding global growth and trade policy.
What data were in focus?
U.S. home builders began construction at a seasonally-adjusted annual rate of 1.26 million homes in November, above the 1.23 million expected, according to a MarketWatch poll of economists.
New building permits in November were issued at a seasonally adjusted annual rate of 1.33 million, versus consensus estimates of 1.27 million, according to FactSet data.
Which stocks were in focus?
Oracle Corp. ORCL, +0.26% closed up 0.3% after the software company reported an earnings beat late Monday.
Shares of CBS Corp. CBS, -1.32% fell 1.3%, after the broadcaster announced Monday that former CEO Les Moonves won’t receive a $120 million severance package after the board of directors concluded he violated company policy and was uncooperative with an investigation into sexual misconduct allegations.
Boeing Co. BA, +3.77% rose 3.8%, after the company announced a 20% dividend increase and a new share buyback program Monday evening.
Shares of Tilray, Inc. TLRY, +16.10% advanced 16% Tuesday, after the cannabis company announced that it has reached a global supply and distribution agreement for medical marijuana with pharmaceutical giant Novartis AG NOVN, -1.31%
Shares of Darden Restaurants, Inc. DRI, +5.02% rose 5%, after the Olive Garden parent company reported second-quarter same-store sales figures that beat Wall Street expectations.
How did the benchmarks trade yesterday?
On Monday, the Dow retreated 507.53 points, or 2.1%, at 23,592.98, the S&P 500 fell 54.01 points, or 2.1%, at 2,545.94, and the Nasdaq Composite Index retreated 156.93 points to 6,753.73, a drop of 2.3%.
The S&P 500 closed at its lowest level since October of 2017 on Monday, the Nasdaq finished at its lowest since November of 2017, and the Dow closed at lowest level since March 23, according to Dow Jones Market Data.
How are other markets trading?
Asian markets closed lower Tuesday, with Japan’s Nikkei NIK, -0.60% Hong Kong’s Hang Seng Index HSI, +0.13% and China’s Shanghai Composite Index SHCOMP, -1.03% losing ground.
In Europe, closed lower, with the Stoxx Europe 600 SXXP, -0.82% and the FTSE 100 UKX, -1.06% ending the day in the red.
Crude oil CLF9, +0.45% continued to slide Tuesday, down more than 7% on the day. The price of gold GCG9, -0.01% meanwhile, rose 0.1%, while the U.S. dollar DXY, -0.25% was virtually unchanged.