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A final New Year's eve hurrah, thanks to signs of progress in US-China trade talks, was not enough to stop Wall Street from enduring its worst year since the financial crisis in 2008 and worst December since 1931.
The Dow Jones Industrial Average ended 2018 with a daily rise of 265.06 points or 1.2% at 23,327.46, but still falling almost 10% in December and 6% for the year as a whole. The S&P 500 gained 0.9% on the day to 2,506.85 but down 7% over the year, while the Nasdaq climbed 0.9% on the last day of the year but still recorded a dropof 5.3% for the past 12 months.
Indications of improving relations between the US and China helped to lift the tone after US President Donald Trump hailed "big progress" in talks over the weekend.
Trump tweeted on Saturday: "Just had a long and very good call with President Xi of China. Deal is moving along very well. If made, it will be very comprehensive, covering all subjects, areas and points of dispute. Big progress being made!"
After the tweet, the Wall Street Journal cited sources familiar with the negotiations as saying that Trump "may be overstating how close the two sides are to an agreement". However, a statement on Sunday from Lu Kang, the spokesperson for China’s foreign ministry, seemed to confirm Trump's trade optimism.
"China stands ready to work with the US to implement the important consensus reached by President Xi Jinping and President Trump in Argentinaa, expand co-operation on the basis of mutual benefit, manage differences on the basis of mutual respect," Lu said.
Market analyst Joshua Mahony at IG was sceptical. "We have seen many false dawns in the past, yet traders will be well aware of the fact that a breakthrough and reversal of current tariffs could bring huge benefits for US firms in particular."
On the downside, however, investors were mulling over the ongoing US government shutdown and disappointing Chinese data.
In Beijing, the National Bureau of Statistics’ official manufacturing purchasing managers’ index printed at 49.4 this month from 50.0 in November, falling short of expectations for a reading of 49.9 and marking the lowest level since February 2016.
The sub-index for total new orders declined into contraction territory and hit its lowest level since February 2016.
Meanwhile, the US government shutdown entered its second week, as Trump and the Republicans remained at odds over funding for his Mexican border wall.
Colin Cieszynski, chief market strategist at SIA Wealth Management, expects stocks to test higher once the government shutdown comes to an end in the new year.
The bear market will continue after that, said Renaissance Macro Research's Jeff deGraaf: “Looking ahead into the first few weeks of the new year, we continue to believe the market will climb higher as tactical internal and sentiment extremes moderate, while sucking the optimists back in, before ultimately taking the next leg down in this bear market.
For the S&P 500, deGraff eyed a wide trading range of about 10%, with support at 2,346 and resistance at 2,600.
Among individual stocks on Monday, Amazon gained ground after a report that the company plans to expand its Whole Foods grocery stores in the US.
Disney topped the Dow as its festive film, Mary Poppins Returns, notched up a 12-day total of $98.5m, while online rival Netflix sat atop the S&P tree after reports that it will soon announce the appointment of media finance veteran Spencer Neumann as its new chief financial officer.
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