The market-wide sell-off that has been a nightmare for US investors since October intensified today once more. On Wednesday, the S&P 500 Index (SPY), NASDAQ Composite Index (QQQ)(VTI), and Dow Jones Industrial Average (DIA) rose 5.0%, 5.8%, and 5.0%, respectively. In contrast, on Thursday at 3:10 PM ET, these indexes were trading with 1.7%, 2.1%, and 1.7% daily losses, respectively. Let’s take a quick look at some key facts and see if the US market has really bottomed out or if yesterday’s rally was just a trap for investors.
Has the market bottomed out?
On December 19, in a statement, the Fed suggested it would continue to encourage “maximum employment and price stability.” The statement signaled the possibility of two more rate hikes in 2019. This statement was dovish compared to the central bank’s previous statements, which reflected an aggressive approach. However, it wasn’t enough to regain investors’ confidence, as they were expecting more dovish comments from the Fed.
Plus, uncertainties about the ongoing US–China trade negotiation remains open. According to a recent Reuters report, China has confirmed that both countries “will hold more talks on trade in January” 2019. The report quoted Chinese Commerce Ministry spokesman Gao Feng saying, “The two sides will arrange consultations including meetings and calls at any time as needed to promote the implementation of the consensus of the heads of state.” Despite these assurances, investors could be waiting for more data and updates to confirm a near-term resolution to the US-China trade disputes.
Moreover, fears of a global economic slowdown have started making investors nervous lately, which might continue to take a toll on investor sentiment in the coming weeks. Nonetheless, many US economic indicators—including auto sales and jobs data—remain strong, which could eventually lead to a sharp recovery in stocks in a couple of months.
As of December 26, US companies Apple (AAPL), Ford (F), General Electric (GE), General Motors (GM), Facebook (FB), Tesla (TSLA), and Amazon (AMZN) have lost 12.0%, 16.6%, 1.5%, 11.7%, 4.6%, 7.0%, and 13.0%, respectively, month-to-date. At the same time, Chinese companies (FXI)(MCHI) Alibaba (BABA), Baidu (BIDU), and NIO (NIO) have tanked 14.2%, 13.4%, and 17.5%, respectively, in December so far.