Stocks finish quarter strong, but Dow snaps longest win streak in 20 years

This was the quarter when investors were reminded that stocks don't go up forever.The euphoria that carried th...

Posted: Mar 30, 2018 9:14 AM
Updated: Mar 30, 2018 9:14 AM

This was the quarter when investors were reminded that stocks don't go up forever.

The euphoria that carried the market higher and higher last year came to an end during the first months of 2018.

It was an extremely turbulent quarter that featured two 1,000-point Dow plunges, powerful rallies and a growing list of fears for investors.

Despite a 309-point jump on Thursday, the Dow lost more than 2% over the three months. That snaps a nine-quarter win streak, the longest in 20 years, and marks the Dow's worst performance since 2015. (Markets are closed on Friday for Good Friday.)

"Things were so placid in 2017. We don't expect it to be as smooth going forward," said Mike Loewengart, vice president of investment strategy at E*Trade.

Wall Street started the year with a boom, as the Dow crossed 25,000 and then 26,000 in the span of just seven trading days. Investors were overjoyed about President Trump's corporate tax cuts and expectations that growth would accelerate.

But the Dow is ending the first quarter about 2,500 points, or 9%, below its all-time high on January 26. That was the Dow's 99th record closing high since Trump's election, and the century mark seemed just around the corner.

Related: When Apple has a bad day, we all have a bad day

Inflation, tariffs and tech cause chaos

Just a week later, a sudden jump in wage growth raised the specter of inflation and rattled the bond market. The Dow plunged by an eerie 666 points that day.

Even though inflation has since receded as a major concern, Wall Street has been rocked by a range of other worries that seem to ebb and flow with the headlines.

Trump's crackdown on trade, first with aluminum and steel tariffs and then with threats against China, unnerved Wall Street. Trade war fears have since eased a bit as Trump has softened his stance and hopes have risen for a resolution with Beijing.

"With tariffs, there is a lot of bark, but there's not much bite," said David Kelly, chief global strategist at JPMorgan Funds.

The tech world, once a reliable source of strength, has faltered. Facebook tumbled into a bear market as a data crisis consumed one of America's most widely held companies.

Other former tech darlings like Tesla and Alphabet, the parent company of Google, have fallen sharply from their all-time highs. Even Amazon is under pressure, thanks to attacks from Trump.

Kelly said the pressure on tech reflects investors' desire to avoid the most expensive areas of the stock market, just in case this slump turns into something deeper.

"People don't want to get caught in a bubble market," he said.

Despite the tech trouble, the Nasdaq advanced 2% for the quarter, extending its win streak to seven.

Related: Is tech wreck for Amazon and Facebook over or just beginning?

Fed fears

Wall Street has bounced from concern to concern lately. But the volatility also shows that investors are adjusting to a vastly different world from a few years ago.

Congress is stimulating the already healthy economy with a rush of spending and huge corporate tax cuts, just as the Federal Reserve is tapping the brakes on growth by raising interest rates. The collision of those powerful forces was bound to create some turbulence.

"Those are the waves," Kelly said of the focus on inflation, tariffs and tech. "But the real issue is the rising tide of interest rates."

Of course, it hasn't just been Wall Street encountering an air pocket this year. Britain's stock market has plunged 8% this year, and stocks in Germany and Ireland have tumbled 6%. Asian markets have also lost ground, including sharp falls in China and Japan.

"I'm amazed at all the doom and gloom," Michael Block, chief strategist at Rhino Trading Partners, said in a report. "After years of whining about the lack of volatility, market players suddenly have more volatility than they can handle."

Now what?

Despite the market turmoil, the fundamental outlook looks bright. Forecasters expect corporate profits and economic growth to accelerate, thanks in part to the help from Washington.

"GDP is growing. People have jobs. Things look pretty good overall," Loewengart said.

That's why some think the market is enduring a temporary storm that will clear the way for new record highs later this year.

"We were way overdue. This is a normal correction that's part of a longer-term uptrend," said Mary Ann Bartels, head of portfolio strategy at Merrill Lynch Wealth Management.

Merrill Lynch believes strong corporate earnings will carry the S&P 500 to 3,000 later this year, a 14% leap from today.

JPMorgan's Kelly doesn't see a bear market so long as the economy keeps chugging along. And he isn't worried about a recession over the next 18 months.

But he warned that the market could encounter trouble in 2019 and 2020 as the economy slows, wages accelerate and borrowing costs rise.

Mississippi Coronavirus Cases

Data is updated nightly.

Cases: 343505

Reported Deaths: 7543
CountyCasesDeaths
Hinds23932444
DeSoto23229283
Harrison20527329
Rankin15411291
Jackson15232252
Madison10959227
Lee10719179
Jones9047169
Forrest8723159
Lauderdale7884244
Lowndes7054151
Lamar702989
Lafayette6548124
Washington5595139
Pearl River5196152
Bolivar4954134
Oktibbeha494398
Panola4771112
Warren4728128
Marshall4701106
Pontotoc447773
Union433279
Monroe4330137
Neshoba4281181
Hancock428088
Lincoln4176116
Pike3667113
Leflore3627125
Tate353388
Alcorn350974
Sunflower347694
Scott341176
Adams340988
Yazoo339376
Copiah324968
Simpson322891
Itawamba314680
Coahoma314085
Tippah306568
Prentiss298863
Covington293484
Leake285475
Marion284181
Wayne277543
George272251
Grenada269488
Newton262364
Tishomingo239770
Winston236784
Jasper230648
Stone229637
Attala226373
Chickasaw219060
Holmes200174
Clay197654
Clarke186880
Tallahatchie183742
Calhoun181332
Smith179235
Yalobusha171540
Walthall145748
Lawrence142826
Greene140134
Amite137543
Noxubee135235
Perry133538
Montgomery133044
Carroll126431
Webster121232
Jefferson Davis116734
Tunica114227
Benton106725
Claiborne105331
Kemper102429
Humphreys100133
Franklin87923
Quitman84719
Choctaw82619
Wilkinson78032
Jefferson71328
Sharkey51618
Issaquena1736
Unassigned00

Alabama Coronavirus Cases

Cases: 587405

Reported Deaths: 11536
CountyCasesDeaths
Jefferson853851591
Mobile48932864
Madison37517533
Shelby27280257
Tuscaloosa27171465
Montgomery26172627
Baldwin25399329
Lee17224181
Calhoun15401334
Morgan15170291
Etowah14954370
Marshall13116235
Houston12077293
Elmore10915219
St. Clair10763252
Limestone10725158
Cullman10546205
Lauderdale10255254
DeKalb9508192
Talladega8949188
Walker7793288
Autauga7563114
Jackson7400117
Blount7362139
Colbert6703142
Coffee6365132
Dale5650117
Russell480243
Chilton4771117
Covington4749125
Franklin458181
Tallapoosa4519156
Escambia441383
Chambers3949125
Dallas3743163
Clarke371263
Marion3463107
Pike332579
Lawrence3263100
Winston298773
Bibb290465
Geneva283983
Marengo262467
Barbour250961
Pickens245562
Butler240872
Hale235578
Fayette227065
Henry213945
Monroe202141
Randolph201144
Cherokee199248
Washington185239
Macon170552
Crenshaw168358
Clay166259
Cleburne161345
Lamar151038
Lowndes145455
Wilcox132331
Bullock126542
Conecuh121332
Coosa118329
Perry110528
Sumter110333
Greene99137
Choctaw64425
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