U. S. Markets

A change in tone by the Federal Reserve and a solid start to earnings season sparked a stunning reversal in investor sentiment and ignited a sharp rally to begin the new year.

The Dow Jones Industrial Average gained 7.2 percent, while the Standard & Poor’s 500 Index added nearly 8 percent. The NASDAQ Composite led, climbing 9.7 percent.1

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With December losses still fresh on investors’ minds, stock prices stumbled out of the gate following Apple’s revised downward earnings, due to a slowdown in China sales.

A More Flexible Fed

However, stocks quickly found firmer footing on a blowout employment report and the news that China trade talks would restart, setting the groundwork for a January rebound.

Investor spirits were further buoyed by words from Fed Chair Jerome Powell. Powell indicated the Fed would be flexible with its policies and listen more closely to what the markets were communicating about future economic growth.

Fed Disappoints

Stocks dropped further following the mid-December Federal Open Market Committee meeting in which policymakers raised short-term rates 0.25 percent. The markets struggled to manage expectations when Fed Chair Jerome Powell indicated the Fed was staying its course with two more potential hikes in short-term interest rates for 2019.

Guidance Adds Fuel

Commerce Secretary Wilbur Ross caused a brief stall in the market’s upward momentum when he stated that Washington and Beijing are “miles and miles” from resolving their trade dispute. Ross’ comments coincided with a growing concern that the partial federal government shutdown would soon have a material effect on economic growth.2

Stocks surged again in the final trading days as a few high-profile organizations offered positive outlooks, which more than offset the poor guidance from a few companies earlier in the week.2

Sector Scorecard

All industry sectors closed out the month in positive territory, with gains in Communication Services (+7.52 percent), Consumer Discretionary (+10.04 percent), Consumer Staples (+3.66 percent), Energy (+11.08 percent), Financials (+10.13 percent), Health Care (+5.04 percent), Industrials (+12.06 percent), Materials (+8.10 percent), Real Estate (+9.89 percent), Technology (+8.06 percent), and Utilities (+1.15 percent).3

January 2019 recap

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