US stocks head sharply lower a day after Dow’s record gain

Posted December 28, 2018

The Dow soared 1,086.25 points, or 5 percent, to 22,878.45.

Still, for many traders watching their screens explode in green, massive gains are viewed with suspicion. The S&P 500 is down 7.7 percent and is on pace for its first annual loss in a decade after including dividends. Inflation is tame. Pay growth has picked up.

Monday morning's drop in US financial markets began after Trump tweeted about the Fed.

Factor in momentum building behind fallen angels such as FAANG (Facebook, Apple, Amazon, Netflix, Alphabet's Google) names throughout the session, spurred in part by Amazon saying it had a "record breaking" holiday season, and you get the makings of a borderline insane 1,086 up day for the Dow.

Bond prices fell. The yield on the 10-year Treasury note rose to 2.79 per cent from 2.75 per cent late Monday. The Nasdaq 100 slid more than 2.5 per cent, eroding some of its 6 per cent surge.

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The Dow Jones finished up almost 1,100 points, or about 5%, at 22,878.

The firm said investors should expect more volatility and attributed the unease to "chaos in Washington", as well as the Federal Reserve's decision to stick to plans for gradual interest rate increases despite the recent stock turmoil.

Santa Claus rallies have been a fixture on Wall Street, according to Bob Manning of Morgan Stanley Wealth Management in Philadelphia. Kohl's gained 8.3 percent to $64.75.

BUYBACK BOOST: JD.com rose 1.5 percent to $20.02 after the Chinese e-commerce company's board authorized a stock buyback program of up to $1 billion.

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THANKS, SANTA: Big retailers were among the gainers. (2.9 percent), and American Airlines (2.9 percent).

Benchmark U.S. crude dropped 3.5 percent to settle at $44.61 a barrel in NY. Each member of the FAANG cohort rallied at least 6.4 per cent, while energy producers surged as crude powered past US$46 a barrel.

The markets were rattled by an unprompted announcement by Treasury Secretary Steven Mnuchin over the weekend that the US banking system was solid. Consider the 19.4 percent drop from April 29 to October 3 in 2011, for instance.

A sharp decline in oil prices weighed on energy stocks.

Investors also bought yen, pushing the dollar 0.4 per cent lower versus the Japanese currency and forcing it to cede some of its 1-per-cent overnight rise.

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If pre-Wednesday levels had held, it could have led to the worst December on record for the major US markets, despite generally strong economic fundamentals. The euro rose to $1.1397 from $1.1353. The Shanghai Composite Index ended 0.9 percent lower to 2,504.82. The Bureau of Economic Analysis said Wednesday that it's required to suspend all operations until Congress approves funding, which means that the government might not release its fourth-quarter report on gross domestic product as scheduled for January 30.