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Stock market starts 2019 with more turbulence

Stock market starts 2019 with more turbulence
Specialist Matthew Greiner on the floor of the New York Stock Exchange. (Richard Drew / Associated Press)

The roller-coaster ride on Wall Street resumed Wednesday, the first trading day of the new year. Stocks plunged early on, then slowly recovered and finished with a slight gain.

The Dow Jones industrial average dropped as much as 398 points in the first few minutes of trading after more shaky economic news from China. But it gradually recouped those losses, and a small rally in the last 15 minutes of trading left major indexes a bit higher than where they started.

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A Chinese government survey and one by a major business magazine showed manufacturing in China weakened in December as global and domestic demand cooled. That weighed on big exporters. Tech companies such as Microsoft and industrials such as Boeing took sharp losses early on, then bounced back.

That kind of whiplash was typical during the last three months of 2018, and many strategists think it is likely to continue.

After trading ended, Apple gave a quarterly sales forecast that was far worse than analysts expected. It said its revenue will be lower than previously believed because of China's slowing economy. In aftermarket trading, Apple fell 7%. Other tech companies, especially chipmakers, sank as well.

Some of last year's worst performers, including energy and internet companies, led the gains Wednesday.

After gliding gently higher for years, propelled by rising corporate profits and extremely low interest rates from the Federal Reserve, stocks have been heaving up and down in recent months as fears — including threats to global economic growth — weigh on investors.

Stocks are coming off their worst year in a decade, and many Americans could be in for a shock when they open their 401(k) statements.

The benchmark Standard & Poor’s 500 index fell 6% in 2018, its first substantial loss since 2008, and dropped 14% since late September. Many other stock indexes around the world fared even worse last year.

The U.S. economy has been expanding for almost a decade, and stocks have risen steadily over that time. In September through December, however, investors became more and more worried that challenges such as the U.S.-China trade war, rising interest rates and political uncertainty could slow the economy and company profits, and possibly tip the U.S. economy and the global one into recession.

Many Wall Street banks are forecasting a year of modest gains for stocks. But most also say they expect these sharp reversals to continue as investors try to handicap so many unknowns.

Vinay Pande, head of trading strategies for UBS Global Wealth Management, said company earnings jumped in 2018 and are likely to keep improving.

The S&P 500 index finished Wednesday with a gain of 3.18 points, or 0.1%, at 2,510.03. The Dow rose 18.78 points, or 0.1%, to 23,346.24. The Nasdaq composite climbed 30.66 points, or 0.5%, to 6,665.94.

Most markets were closed Tuesday for New Year's Day.

Prices on long-term government bonds rose, a sign investors were looking for safer options. The yield on the 10-year Treasury note fell to 2.63% from 2.69%.

After sharp losses at the start of trading, benchmark U.S. crude jumped 2.5% to $46.54 a barrel in New York. Brent crude, used to price international oils, rose 2.1% to $54.91 a barrel in London. Those gains helped lift energy stocks.

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Oil prices have fallen about 40% since early October, with investors thinking the demand for energy could weaken as economic growth slowed. That led to sharp drops in energy stocks.

Julian Emanuel, chief equity and derivatives strategist for BTIG, said investors often start a new year by buying shares of the companies that did the worst the year before.

Meanwhile, healthcare companies, the best-performing part of the market in 2018, fell Wednesday as drugmakers and insurers lost ground.

In other trading:

The dollar fell to 109.21 yen from 109.61 yen. The euro fell to $1.1344 from $1.1445. The British pound slid to $1.2609 from $1.2752.

France's CAC 40 fell 0.9%. The British FTSE 100 edged up 0.1%. Germany's DAX gained 0.2%. Hong Kong's Hang Seng tumbled 2.8%. South Korea’s Kospi fell 1.5%. Tokyo's markets were closed.

Wholesale gasoline rose 1.8% to $1.33 a gallon. Heating oil rose 1.3% to $1.70 a gallon. Natural gas rose 0.6% to $2.96 per 1,000 cubic feet.

Gold rose 0.2% to $1,284.10 an ounce. Silver rose 0.7% to $15.65 an ounce. Copper fell 0.3% to $2.62 a pound.

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