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Stocks Close Higher On The Day But Sharply Lower For The Year - U.S. Commentary


Stocks fluctuated over the course of the final trading day of 2018 on Monday before ending the session notably higher. The major averages all closed firmly in positive territory after turning in a mixed performance last Friday.

In the final minutes of trading, the major averages showed a strong move to the upside. The Dow jumped 265.06 points or 1.2 percent to 23,327.46, the Nasdaq climbed 50.76 points or 0.8 percent to 6,635.28 and the S&P 500 advanced 21.11 points or 0.9 percent to 2,506.85.

Nonetheless, the major averages moved significantly lower for the year due largely the sell-off seen in recent weeks. The Nasdaq tumbled by 3.9 percent, while the Dow and the S&P 500 plunged by 5.6 percent and 6.2 percent, respectively.

The higher close on the day may partly have reflected window dressing, with mutual fund and other portfolio managers looking to improve their performance for the year.

Buying interest was also generated in reaction to comments from President Donald Trump expressing optimism about a U.S.-China trade deal.

In a post on Twitter on Saturday, Trump he had a "long and very good" telephone call with Chinese President Xi Jinping.

"Deal is moving along very well," Trump tweeted. "If made, it will be very comprehensive, covering all subjects, areas and points of dispute. Big progress being made!"

Despite Trump's optimism about the potential for a long term trade deal between the world's two largest economies, traders remain skeptical.

Traders also seemed reluctant to make more significant moves amid the ongoing government shutdown in the U.S. and lingering concerns about the global economy.

A lack of major U.S. economic data also kept some traders on the sidelines along with the New Year's Day holiday on Tuesday.

Sector News

Biotechnology stocks showed a substantial move to the upside on the day, driving the NYSE Arca Biotechnology Index up by 2.3 percent.

The index continued to recover after ending last Monday's trading at its lowest closing level in well over a year.

Considerable strength also emerged among gold stocks, as reflected by the 1.5 percent jump by the NYSE Arca Gold Bugs Index. The strength in the sector came despite a modest decrease by the price of gold.

Healthcare, retail, and networking stocks also saw significant strength on the day, while tobacco stocks showed a notable move to the downside.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance on Monday, with many markets across the region closed for New Year's Eve. Hong Kong's Hang Seng Index surged up by 1.3 percent, while Australia's S&P/ASX 200 Index slipped by 0.1 percent.

The major European markets also ended the day mixed, although several markets were closed. While the U.K.'s FTSE 100 Index edged down by 0.1 percent in an abbreviated trading session, the French CAC 40 Index jumped by 1.1 percent.

In the bond market, treasuries showed a notable move to the upside after ending last Friday's trading roughly flat. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 5 basis points to an eleven-month closing low of 2.686 percent.

Looking Ahead

Following the holiday on Tuesday, trading activity is likely to remain relatively light on Wednesday amid another quiet day on the U.S. economic front.

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