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By Avantika Chilkoti 

U.S. stocks fell Friday, following a week of dramatic swings on Wall Street that underscore the uncertainty gripping investors heading into 2019.

The Dow Jones Industrial Average lost 32 points, or 0.1%, to 23105, after storming back to a record rebound Thursday. The S&P 500 slipped 0.1% and the Nasdaq Composite fell 0.4%. All three major U.S. indexes are up at least 3% this week, on course to snap a three-week losing streak.

Despite the gains, the blue-chip index and S&P 500 are on pace for their worst December since 1931.

The holiday period has been defined by wild market swings, with U.S. stocks slumping Thursday before staging a dramatic comeback just before markets closed. The Dow swung from an intraday 2.7% fall to close 1.1% higher.

The S&P 500 and Dow industrials at the beginning of the week were on the brink of a bear market, typically defined as at least a 20% decline from a recent high. Following a rally over the past two trading days, the indexes were down 15% and 14% from their respective peaks.

"A bear market doesn't just come on this fast and this strong," said Tatyana Bunich, president and founder at Financial 1 Wealth Management, adding there would need to be signs of a recession, such as rising unemployment, weak earnings and slumping consumer-spending data.

"None of that is happening. I do believe there's going to be slowing in the economy, but it's not going to happen overnight," she said.

Ms. Bunich, whose clients are mostly retirees, said the firm temporarily moved about 80% of its portfolio into cash in mid-December to get through the year-end volatility. She said value stocks could be coming back in favor next year as investors move away from high-growth names. She also attributed this month's volatility to tax-loss selling, margin calls and automated trading.

In Friday's action, energy and technology shares led the S&P 500 lower, while defensive-oriented sectors including consumer staples, utilities and real estate rose.

Energy stocks slipped as a rally in oil prices faded. U.S. oil futures slipped less than 0.1% to $44.59 a barrel.

Tesla shares rose 1.5% after the electric auto maker named a pair of new independent directors -- including Oracle Chairman Larry Ellison and Kathleen Wilson-Thompson, the global head of human resources for Walgreens Boots Alliance, to a board that has been under fire for its oversight of Chief Executive Elon Musk.

Despite the rally late this week, analysts remain cautious about the prospects for equity markets into the new year.

"Investors continue to be worried by the economic outlook," said Charles St Arnaud, senior investment strategist at Lombard Odier Investment Managers. He also pointed to a string of news from Washington that has created uncertainty for investors, including President Trump's complaints about the U.S. Federal Reserve, just as thin trading exaggerates market moves.

Top of mind in the U.S. this week is the partial government shutdown, which is expected to continue into January as the issue of funding a wall on the border with Mexico cleaves further open a partisan split in Congress.

Concerns that the U.S. economy is set for a slowdown have weighed on markets in recent months, as the effects of President Trump's tax reforms wear off and the U.S. central bank tightens monetary policy.

Equity markets rallied earlier this year, led by the technology sector, but those gains have been reversed in the final three months of the year. The S&P 500 and the Dow industrials this quarter are down 15% and 13%, respectively.

There have been few havens for investors, with gold, international bonds and cash equivalents all offering paltry returns.

The WSJ Dollar Index, which tracks the dollar against a basket of 16 currencies, was down 0.2%.

The 10-year U.S. Treasury yield fell to 2.740%, from 2.744% on Thursday. Yields move inversely to prices.

Elsewhere, the Stoxx Europe 600 added 2%. In Asia, Hong Kong's Hang Seng Index rose 0.1% and China's Shanghai Composite gained 0.4%.

Write to Avantika Chilkoti at Avantika.Chilkoti@wsj.com

(END) Dow Jones Newswires

December 28, 2018 11:09 ET (16:09 GMT)

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