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U.S Market Wrap 14 December 2018

Posted by James Nasioulas on 14-Dec-2018 12:53:29

Stocks tiptoed between gains and losses on Thursday as the Dow eked out a gain finishing higher by 0.29% after falling from a 200 point gain earlier in the session. The S&P 500 and the Nasdaq weren’t able to hold onto earlier rallies and finished flat -0.02% and lower by -0.39%, respectively. The seesaw in price action we saw was a result of investors continuing to digest the trade news that seem to trickle through each day.  

The VIX Index which measures the amount of volatility in the markets or degree of fear and uncertainty declined to 20.73 after trading as high as 23.00 earlier this week. If investors receive some decisive commentary from officials on the trade matter the market will use this as a catalyst to either push higher or lower, depending on the outcome. A deal will be positive for relations and the markets, yet investors should monitor and be concerned about President Trump’s erratic comments on social media as we have seen in the past their ability to send the markets into a frenzy.

Despite the whipsaw between stocks, the utilities index was the best performing S&P 500 sector rising +0.88% percent as investor’s eyed more defensive stocks. Procter and Gamble (PG) shares closed higher by +2.6% and McDonalds (MCD) shares higher by +1.6%. One of the more notable movers included Kimberley-Clarke (KMB) shares rising 3.96 percent. Over the past month, Utilities have been one of the better performing sectors during the rise in volatility as the SPDR Utilities ETF (XLU) has risen +3.81% month-to-date (see XLU daily chart below)

xlu 14.12.18-1

The major airlines suffered steep losses after a pop higher in oil prices as data showed inventory declines in the U.S - Light Sweet crude was 79 cents higher, or 1.5 percent, at $51.94 a barrel and is currently trading at $52.74 a barrel. Delta Airlines (DAL) shares were down 4.83 percent along with American Airlines (AAL) down 5.50 percent. Chevron (CVX) and Exxon Mobil (XOM) shares were beneficiaries of the move higher rising +0.28% and +1.26%, respectively. Retail stocks also disappointed weighed down by a further decline in Under Armour (UA) shares following revised future outlook at an investor meeting. Under Armour shares fell 5.2 percent, Urban Outfitters (URBN) fell 4.52 percent, Kohl’s (KOH) shares fell 4.42 percent and Macey’s (M) declined 4.41 percent.

Stocks worth highlighting include Tesla (TSLA) as shares rose +2.78% and traded at the top of the range at $376.79. The recent rally from the lows at $250.00 comes from an impressive earnings report where the electric car maker released a profit for the first time combined with sanctions against CEO Elon Musk by the SEC following a series of social media outbursts.

tsla 14.12.18

In after-hours trading, Costco (COST) shares have fallen 3 percent after reporting disanointing results. Adobe (ADBE) shares are currently trading lower by -1.14% after falling as much as 3% beating on revenue estimates but disappointing on earnings estimates. Starbucks (SBUX) shares fell more than 3 percent after hours after announcing it will partner with food delivery service Uber Eats at 2,000 of its stores in the U.S. beginning in 2019.

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On the macro outlook, the ECB confirmed an end to its bond purchasing program, quantitative easing (QE) from the end of December as anticipated by investors – the EURUSD was steady at 1.1357. The central also kept interest unchanged and also pointed to reinvesting cash from maturing bonds for an extended period of time.

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