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Stock Market News for Jan 14, 2019

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Benchmarks snapped their five-day rally on Friday, giving up gains and ending in the red. However, for the week, the three major benchmarks ended in positive territory. While, the partial government shutdown reached it 21st day, positive developments on the trade negotiations front overshadowed resultant fears. Further, officials from the Federal Reserve stated that the central bank would be cautious while hiking interest rates this year. Such developments boosted the investors’ sentiments.

The Dow Jones Industrial Average (DJI) decreased 0.02%, to close at 23,995.95. The S&P 500 also decreased 0.01% to close at 2,596.26. The tech-laden Nasdaq Composite Index closed at 6,971.48, losing 0.2%. The fear-gauge CBOE Volatility Index (VIX) increased 1.4% to close at 19.77. Decliners outnumbered advancers on the NYSE by a 1.50-to-1 ratio. On Nasdaq, a 1.59-to-1 ratio favored declining issues.

How Did the Benchmarks Perform?

The Dow shed almost 6 points to end the session in negative territory. Shares of Caterpillar Inc. (CAT - Free Report) dipped 0.7% after Goldman Sachs (GS - Free Report) reduced earnings forecast for the company for the period between 2018 and 2020. This decline led the broader industrial sector lower. Another Dow component, 3M Company (MMM - Free Report) declined 0.7% and weighed on the index.

The S&P 500 dropped about 0.4 points, just below its break-even level. Of the 11 major segments of the S&P 500, six ended in the red, with energy and materials shares leading the laggards. The Materials Select Sector SPDR ETF (XLB) and Energy Select Sector SPDR ETF (XLE) declined 0.4% and 0.6%, respectively. Shares of Activision Blizzard, Inc. declined 9.5% and was the biggest loser from the S&P 500.

Meanwhile, the Nasdaq dipped 14.6 points to also end in the red. Shares of tech heavyweights such as Microsoft (MSFT - Free Report) and Apple (AAPL - Free Report) declined 0.8% and 1%, respectively to lead the broader tech sector lower. This weighed on both the Nasdaq as well as the S&P 500.

Powell’s Comments and Improving Trade Relations Relieve Investors

Despite the broad-based decline in stocks, market volatility dipped a bit after speeches by Federal Reserve officials boosted investor sentiment. Fed officials maintained that the central bank would take a cautious approach toward raising interest rates in 2019. Stressing on the same, the Fed chief Jerome Powell announced at the Economic Club of Washington on Thursday that the central bank would be “flexible” and “patient” when dealing with monetary policy related issues.

U.S. Treasury Secretary Steven Mnuchin announced in a press conference on Thursday night that Vice Premier Liu He, president Xi Jinping’s most senior economic advisor would ‘most likely’ be visiting the United States later this month. The purpose of the visit would be to further the discussion on the U.S. – China trade dispute. The announcement was made just a day after mid-level trade talks between the countries ended in Beijing. Such developments provided a welcome respite to investors.

Shutdown Fears Continue

Meanwhile, the partial U.S. government shutdown reached its 21st day, matching up with the record of longest such shutdown in history. Although such an event did not have an impact on the markets but thousands of federal workers would not be receiving a paycheck this week. Further, economists have warned of negative ramifications for the overall economy should this continue.

Economic Data

On the data front, the Consumer Price Index (CPI) declined 0.1% in December. This marked the metric’s first decline in nine months. Further, the increase in cost of living index over the past 12 months decelerated to a 1.9% growth, falling below the 2% level for the first time since August 2017.

Weekly Roundup

For the week, the Dow, the S&P 500 and the Nasdaq rose 2.4%, 2.5% and 3.5%, respectively. Such gains were made possible by progress in trade talks between the United States and China. The bull-run for the U.S. stocks continued for the fifth straight day on Thursday buoyed by Fed Chairman Jerome Powell’s statement that the central bank will be patient when considering rate hikes. Meanwhile, partial government shutdown remained a concern.

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