The first week of 2019 has been riddled with the same volatility that plagued Wall Street throughout December, fueled by a partial government shutdown and concerns that China’s status as an engine of the global economy is likely in jeopardy. After another two days of wild swings and a confounding jobs report, all major indexes bounced back, boosted by a healthy December jobs report and confirmation of upcoming trade negotiations with China.
The Dow Jones industrial average climbed more than 740 points, closing the day up 3.28 percent at 23430.59. The Standard & Poor’s 500-stock index was up 3.43 percent at close and the tech-heavy Nasdaq was up 4.26 percent.
Throughout his time in office, President Trump has frequently pointed to the markets as proof of his success. But as the markets have crumbled, he has foisted blame on the Federal Reserve and on his opponents. In tweets Friday morning, the president attributed the volatility on Wall Street to the Democrats' takeover of the House but insisted “things will settle down.”
Thursday was particularly brutal day for markets after Apple announced that it was cutting its quarterly revenue forecast for the first time in 15 years because of “economic deterioration” in China. The company’s shares sank 10 percent, and other tech and China-exposed companies took similar hits, dragging the Nasdaq down 3 percent into bear territory. The Dow dropped 660 points, or 2.8 percent, to close at 22,686. The S&P 500 fell 2.5 percent.
For the past 20 years, China’s explosive economic expansion — fueled by a wealthy, ever-growing middle class of more than 400 million consumers — has anchored and enriched the global economy. But as the juggernaut loses its power, amid a damaging trade war with the United States, it will likely spell doom for many Western companies that have been buoyed for years by China’s extreme buying power.
“There are a heck of a lot of U.S. companies that have a lot of sales in China that are basically going to be watching their earnings be downgraded next year,” Kevin Hassett, chairman of the White House Council of Economic Advisers, said in an interview with CNN Thursday.
Concerns about a Chinese slowdown sent markets down across the board in Europe and Asia on Thursday, but Friday brought somewhat of a rebound. While strife in tech companies pushed Japan’s Nikkei down more than 2.2 percent in its first day of 2019 trading, the Shanghai Composite index climbed more than 2 percent after news that China’s services sector expanded last month. Hong Kong’s Hang Sang index gained 2.2 percent. European markets notched gains in midday trading, with the Stoxx 600 Benchmark up nearly 1.8 percent.
Some confidence was restored to U.S. markets after a new report showed that the nation’s economy added 312,000 in December, making 2018 the best year for job creation since 2015. Although unemployment rose to its highest level since July at 3.9 percent, economists believe the increase is because more people are looking for jobs, with some 400,000 people on the hunt last month.
“The American economy is booming based on today’s reading of the employment situation, which should go a long way to reassuring nervous Nellies in financial markets,” Chris Rupkey, chief financial economist of MUFG Union Bank, said in a note to investors Friday.
But while many analysts welcomed the report as evidence of a robust economy, others cautioned that it doesn’t erase signs of an impending slowdown.
“I would not view this as a sign that growth in 2019 will be as strong as 2018,” said Michael DePalma, chief executive of PhaseCapital. “A strong employment report is a welcome sign of relief, but I don’t think it materially changes the fact that we still have a flat yield curve and that this economic cycle is very mature.”