Stocks fell Thursday, and the S&P 500 closed in the red for the year for the first time since 2008, led by a nearly 24% loss in the energy sector. But while the S&P 500 dropped just 0.7% in 2015, the Dow Jones Industrial Average lost 2.2%. However, the tech-heavy Nasdaq gained 5.7% for the year.
Volume was light Thursday, which contributed to high volatility, especially in energy stocks. Sellers drove crude prices down at the opening but up on the close. Oil futures declined more than 30% in 2015 to $37.04 a barrel.
Gold closed down slightly on the last trading day of the year at $1,060.20 an ounce. This marked a 10%-plus decline for the year and the third consecutive annual loss.
Kinder Morgan Inc (KMI) rose 2.6% Thursday, benefitting from a rise in natural gas, which jumped 6% following a bullish inventory report.
At Thursday’s close, the Dow Jones Industrial Average fell 179 points at 17,425, the S&P 500 lost 19 points at 2,044, the Nasdaq was off 58 points at 5,007, and the Russell 2000 was down 14 points at 1,136.
The NYSE Composite’s primary exchange traded 753 million shares with total volume of 2.6 billion. The Nasdaq crossed 1.4 billion shares. On the Big Board, decliners outpaced advancers by 1.6-to-1, and on the Nasdaq, decliners led by 1.8-to-1. On the NYSE, block trades increased to 4,225, up from 3,802 on Wednesday.
For the first time since I have been constructing the 17-month moving average chart of the S&P 500, it appears ready to issue a triple reversal in the same year.
It issued a sell signal in August — the first since August 2011– as price crossed down through the moving average. Then, after the September market low, it reversed to a “buy” in October, and it is now very close (within 0.22 points) of a sell signal.
Conclusion
While U.S. stocks had their worst year since 2008 and our 17-month moving average chart of the S&P 500 appears ready to issue a sell signal, stocks in some of the most economically stressed countries did well. The Stoxx Europe 600 rose 6.8% while France’s CAC 40 gained 8.5%. The Shanghai Composite was up 9.4% after plummeting 40% in late August.
It seems to be a world turned upside down. But many of our problems were the result of falling energy prices and a rising U.S. dollar, which gained 11.4% against the euro in 2015.
With the Dow Theory in a non-confirmed status, interest rates rising and the S&P 500 not cheap with a P/E ratio of 22.95, many investors will stand aside. But there is value in stocks with stable dividends and sectors that have been hit hard that will not only survive but flourish, such as energy and biotech.
I suggest investors focus on those areas while traders play both sides of what will probably continue to be a very volatile stock market in 2016.
Today’s Trading Landscape
To see a list of the companies reporting earnings today, click here.
For a list of this week’s economic reports due out, click here.
