Stocks rang in the New Year with an upside reversal on heavy volume. At the open the Dow fell almost 400 points but then reversed and finished with a gain of 18 points at 23,346. Banks marched higher as did oil stocks.
The opening bell selloff seems to have been sparked by economic news from China. The Caixin/Markit Manufacturing PMI fell to 49.7 last month from 50.2 in November, dropping below the critical 50 level that separates growth from contraction. Besides the first shrinking factory activity figure in 19 months, two forward looking measures for new orders and new export orders showed contraction as well.
Oil prices were up 3.8% with WTI crude trading at $46.61 a barrel. Reports of production cutbacks from OPEC boosted oil prices and it appears that production cuts are coming quicker than markets had anticipated. Meanwhile in the US, consumers here in Seattle are starting to see gasoline prices below $3 per gallon in some spots. The US also signed a 20 year natural gas supply deal with Poland.
Part of the reason for the 2018-year end selloff was attributed to hedge funds liquidating holdings as large investors pulled funds before the year ended. One top performing hedge fund in particular has had a terrible 2018. Greenlight Capital, run by David “Silky Seamore” Einhorn, posted the worst returns in its 22-year history with a negative 34% beating. This is according to Bloomberg and is interesting since David is a smart guy. In what could be described as one of the worst recorded years for the $3 trillion hedge fund industry, several hedge funds closed their doors amid withdrawals due to poor performance. A joke on Wall Street is: What is the difference between a pigeon and a hedge fund manager?........The pigeon can still make a deposit on a Mercedes! haha