The strong January rally on Wall Street has the market on track for its best start to a year since 1987 – and we know how that year went down in history with the 22% plunge on black Monday in October proving to be more decisive than the upbeat start nine months earlier.
After Friday’s rally capped another solid week.
Friday saw the Dow jump 336.25 points, or 1.38%, to 24,706.35, the S&P 500 rise 34.75 points, or 1.32%, to 2,670.71 and the Nasdaq add 72.77 points, or 1.03% to end the week at 7,157.23.
For the week, the Dow rose 2.96%, the S&P 500 added 2.87%, and the Nasdaq jumped 2.66%.
All three indexes registered their biggest four-week percentage gain since October 2011. US stock markets will be closed tonight for the Martin Luther King Jr. holiday.
The S&P 500 is up 5.2% from the start of the year – its strongest 12-day start to a calendar year in 32 years.
The S&P 500 is now around 9% below its September 20 record close after dropping 19.8% below that level by Christmas Eve (and dipping into bear territory several times last month).
The Dow is up 4.5% over the same period, while the Nasdaq risen a solid 6.8% with Netflix leading the way with a 27% rise (which is after a 4% drop on Friday after the market marked down the streaming giants first quarter results which showed a strong 8 million gain in global subscriber numbers).
But shares in the electric carmaker, Telsa fell 13% after the company announced more job cuts and warned of lower profits because of continuing cost pressures.
MarketWatch.com pointed out that small caps are soaring with the Russell 2000 index up 8.8% in the first 12 trading days of 2019.
But MarketWatch also wondered if investors had moved too quickly from gloom to boom without barely a look back at the sell-off in the final quarter of 2018.
Investors have become more positive because some progress seems to be underway in trade talks between China and the Trump administration, the Fed is on hold while it ponders its long campaign of rate rises and the economy seems to be holding at a slightly lower level than in the first quarter of 2018.
But senior Fed members have started warning of the impact of the partial shutdown on an already slowing economy – which could indicate the US central bank is cooling to the idea of any more rate rises in 2019.
But the partial shutdown on the government thanks to President Trump’s demand for funding of a border wall is having an impact and if it continues for another week could see growth slipped by half a percent or more this quarter.
US consumer confidence has tumbled to a two year low as a result of the impasse in Washington and the President’s falling approval ratings.
The University of Michigan’s consumer confidence index fell to a more than two-year low of 90.7 in January, down from 98.3 in December, and well below market forecasts of 97.5.
