According to more and more market analysts, Wall Street is heading for stepped up selling pressure after a key chart showed the key S&P 500 had entered a significantly bearish formation.
Its 50-day moving average has fallen below its 200-day moving average – creating a so-called ‘death’s cross’ which analysts claim spells ‘sell-off’ ahead.
That worried investors on Friday, as did more trade wars uncertainty and questions about US economic growth in 2019.
The S&P 500 finished 2.3% lower on the day, having been down as much as 2.7%. The Dow lost 2.2% and the Nasdaq fell 3.1%.
Over the four-session week — both US stock and bond markets were shut on Wednesday to mark the death of former president George H.W. Bush — the S&P 500 fell 4.6%.
The Dow fell 4.5% and Nasdaq tumbled 4.9%. It was the biggest weekly percentage decline for all three indexes since March, while also marking the worst start to a December since 2008.
Last week (and especially Friday’s) slump pushed the S&P 500 and Dow back into negative territory for 2018, while the Nasdaq is hanging onto a 1% year-to-date gain.
Friday trading also left benchmark US Treasuries with their biggest weekly rally in over three years as investors hauled back on their expectations for Fed rate rises next year and in 2020.
Some don’t see any more increases next year after the one expected from next week’s final meeting for 2018.
The yield on the key 10-year US Treasury bond eased 2 basis points (bps) at 2.86% on Friday while the yield on the more policy-sensitive two-year bond was down 3.9 bps at 2.72%
For the week, 10-year yields were down 15.7 basis points, the biggest decline since October 2015. The 9.6 bps weekly decline for two-year yields was the second-largest this year, behind a big move in late October.
The November jobs report fell short a fraction – 155,000 new jobs were created against forecasts around 190,000 while plus fewer jobs reported in the two preceding months as revisions were made.
The jobless rate remained at an ultra-low 3.7%, while wages growth was steady on the annual rate of 3.1% from the previous month.
Then news broke mid-session of some sort of agreement between OPEC members and Russia and several other countries to cut production by 1.2 million barrels a day with Saudi Arabia and Russia accounting for the bulk of the cut.
The cut will apply from January 1 and last six months at least. Oil prices surged nearly 5% but eased as the agreement was examined and found to be a bit fuzzy on just who will be cutting.
For the week, the 4.6% slide in the S&P 500 all but reversed the previous week’s 4.8% gain. Eurozone shares fell 3.6% and Japanese shares lost 3%. Chinese shares rose 0.3% as did Australian shares.
The $A fell back to 72 US cents on the back of trade concerns (down a cent over the week) and weak Australian economic data which is starting to signal that a rate cut might happen next year if conditions to no strengthen soon in consumer spending and housing.
