Wall Street closed out a dismal, turbulent year for stocks on a bright note Monday, but the market still finished 2018 with its worst showing in a decade.
After setting a series of records through the late summer and early fall, major U.S. indexes fell sharply starting in October and ended the year in the red.
The Standard & Poor’s 500 index, the market’s main benchmark, finished the year with a loss of 6.2%. The last time the index fell for the year was in 2008 during the financial crisis. The S&P 500 posted tiny losses in 2011 and 2015, but eked out small gains in both years once dividends were included.
The Dow Jones industrial average declined 5.6%. The Nasdaq composite slid 3.9%.
Major indexes in Europe also ended 2018 in the red. France’s CAC 40 finished the year down 11%. Britain’s FTSE 100 lost 12.5%. Germany’s DAX ended the year in a bear market, down 22% from a high in January and 18% from the start of the year.
“This has really been a challenging year for investors,” said Jeff Kravetz, regional investment strategist at U.S. Bank Wealth Management. “This was really the year that market volatility returned with a vengeance.”
Wall Street started 2018 strong, buoyed by a growing economy and corporate profits. Stocks climbed to new highs early, shook off a sudden, steep drop by spring and rode a wave of tax-cut-juiced corporate earnings growth to another all-time high by September. Then the jitters set in.
Investors grew worried that the testy U.S.-China trade war and higher interest rates would slow the U.S. economy and hurt corporate profits. A slowing U.S. housing market and forecasts of weaker global growth in 2019 stoked traders’ unease.
In October the market’s gyrations grew more volatile.
The autumn sell-off knocked the benchmark S&P 500 index into a correction — a drop of 10% from a recent high — for the second time in nine months. A Christmas Eve plunge brought it to the edge of bear market territory — a 20% drop from a recent peak — before closing just short of the threshold that would have meant the end of the market’s nearly 10-year bull market run.
“For markets to move higher next year, we’re going to have to resolve those issues,” Kravetz said.
The risks have market strategists forecasting another turbulent year for stocks in 2019, and potentially one of the most difficult years for investors since the bull market began.
On Monday, the S&P 500 rose 21.11 points, or 0.9%, to 2,506.85. The Dow climbed 265.06 points, or 1.2%, to 23,327.46. The Nasdaq rose 50.76 points, or 0.8%, to 6,635.28. The Russell 2000 index of smaller-company stocks rose 10.64 points, or 0.8%, to 1,348.56; for the year, it sank 12.2%.
Bond prices rose. The yield on the 10-year Treasury note fell to 2.68% from 2.73% late Friday. The yield started off the year at 2.41%.
Healthcare stocks paved the way for Monday’s modest gains. The sector ended the year with a 4.7% increase, leading all sectors in the S&P 500. Utilities was the only other sector to eke out an annual gain, adding 0.5%.
Technology companies, a big driver of the market’s gains before things deteriorated in October, ended the year with a 1.6% loss. Three of the five “FAANG” stocks — Facebook, Amazon, Apple, Netflix and Google parent Alphabet — ended 2018 lower: Facebook slid 25.7%, Apple slipped 6.8%, and Alphabet edged down 0.8%. Amazon, meanwhile, climbed 28.4%, and Netflix jumped 39.4%.
Energy companies fared the worst, plunging 20.5% for the year, as the price of U.S. crude oil tumbled about 40% from a four-year peak of $76 a barrel in October.
On Monday, benchmark U.S. crude oil inched up 0.2% to $45.41 a barrel. Brent crude, the benchmark for international prices, rose 1.1% to $53.80 a barrel in London.
Investors drew encouragement Monday from a Sunday tweet from President Trump, in which he said he had a “long and very good call” with Chinese President Xi Jinping. Trump added: “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.”
Meanwhile, the official Xinhua News Agency cited a Chinese Foreign Ministry spokesman as saying that “China stands ready to work with the United States to move forward the China-U.S. ties which are underpinned by coordination, cooperation and stability.”
Stocks also got a boost in early December when the United States and China agreed to a truce on trade, but then plunged when it was unclear what exactly both sides had agreed upon.
In other trading Monday, the dollar fell to 109.61 yen from 110.41 yen. The euro strengthened to $1.1445 from $1.1442.
Gold slipped 0.1% to $1,281.30 an ounce. Silver rose 0.7% to $15.54 an ounce. Copper fell 1.9% to $2.63 a pound.
In other energy futures trading, wholesale gasoline slipped 0.2% to $1.32 a gallon. Heating oil rose 1% to $1.68 a gallon. Natural gas plunged 11% to $2.94 per 1,000 cubic feet.
Trading will be closed Tuesday for New Year’s Day.