Stocks started the day higher before reversing and taking another beating. Early optimism was the product of New York Fed President, John Williams, saying that the Fed is listening to the market, and will be open to re-evaluating their interest rate outlook in 2019. But this news and a 300+ point gain was quickly erased as more negative news with a possible government shutdown dominated the sentiment in the market. The Dow finished the day down points 414, and closed at 22,445.
In the short term, negative sentiment and momentum seem to be driving the market. Investors have been dealing with the uncertainty of trade relations with China, a slowing in the international economy, and interest rate hikes by the Fed. Today, the markets were hit with the resignation of Secretary of Defense, General Jim Mattis, and a potential shutdown by the federal government. While these things probably don’t factor that much into the economy, and therefore the markets, it just creates more uncertainty and short-term fear, which continues to drive the negative momentum of the market. It also doesn’t help that we’re headed into the holidays, and traders are looking to sit more in cash so they don’t have to worry about their exposure while they’re out of the office eating figgy pudding.
While sentiment is negative, the reality is that the U.S. economy continues to post strong numbers. Yesterday, it was reported that 3rd quarter GDP was 3.5%, and unemployment continues to be low while consumer spending has been strong. Companies are still showing solid earnings, such as Nike. The Northwest brand posted double digit revenue growth and a 13% increase in earnings per share even considering that a significant part of their business is done in China. Nike is projecting strong sales in 2019 as well, and the stock was rewarded with a 7% gain today, which is quite impressive considering the largely negative market.