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Dow rises 260 points as Wall Street closes out its worst year in a decade

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December 31st, 2018

The Dow Jones Industrial Average rose on Monday as investors tried to end the worst year on Wall Street since the financial crisis on a high note.

The 30-stock index was up 261 points, led by gains in Apple and Goldman Sachs. The S&P 500 climbed 0.9 percent while the Nasdaq Composite gained 0.9 percent. Stocks got a boost after President Donald Trump tweeted this weekend that China and the U.S. were making progress on trade talks.

Stocks were on track to log their worst annual performance since 2008, with the S&P 500 and Dow both falling more than 6 percent. In 2008, the S&P 500 and Dow plunged 38.5 percent and 33.8 percent, respectively. The Nasdaq is also down more than 4 percent for the year and on pace for its worst year in a decade, when it dropped 40 percent.

The S&P 500 and Dow are also on pace to fall for the first time in three years, while the Nasdaq is set to snap a six-year winning streak. For the quarter, the S&P 500 and Nasdaq are down 14.4 percent and 17.9 percent, respectively, their worst quarterly performances since the fourth quarter of 2008. The Dow is on pace to log its worst quarter since the first quarter of 2009.

A sizable chunk of this quarter's losses came in December. The indexes are all down at least 9 percent for the month. The Dow and S&P 500 were also on track to record their worst December performance since 1931 and their biggest monthly loss since February 2009.

Investors dumped stocks this month amid concerns of an economic slowdown and fears the Federal Reserve might be making a monetary policy mistake. Concern over ongoing trade negotiations between China and the U.S. have also pressured stocks this month.

But John Stoltzfus, chief investment strategist at Oppenheimer Asset Management, said these declines are "setting the stage for upward surprises in 2019."

"With what we believe to be almost all but the kitchen sink priced into current valuations, we see opportunity for multiples to return to levels seen at the end of the third quarter … with multiple expansions resulting in a global equity rebound in the coming year," Stoltzfus wrote in a note.

"That said, we do not expect a rally of great significance to emerge until sometime into the first quarter of 2019. We look for market risk to weigh on investor sentiment into the new year until catalysts for a rally of some material significance appear on the scene," he added.

Monday's gains came after Trump said he had a "very good call" with Chinese President Xi Jinping to discuss trade. The president also claimed that "big progress" was being made on this front. Trump's statements sparked gains in markets worldwide.

However, The Wall Street Journal reported that Trump may be overstating how much progress was being made. The report cited people familiar with the situation. China and the U.S. agreed earlier this month to a 90-day grace period to try and work out their differences on trade.

"The threat of an escalating trade war has chilled US business confidence, with managers uncertain as to if/how they should restructure global supply chains," Nicholas Colas, co-founder of DataTrek Research, wrote in a note to clients.

"The most bullish case here is that the tariff issue will be settled in Q1 2019, and a meaningful resolution should be enough to trigger a first half rally for stocks," Colas added. "Against that optimistic take are two bearish outcomes: one, that these negotiations take longer and two, that they fail outright."

 - CNBC.

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