Wall Street down on Thursday after biggest rally in years; a jump ahead

Chris L
Category:  Financial News
The United States stocks market is trading down on Thursday following a considerable rally performed on Wednesday amid high volatility and post-Christmas risk appetite. 

The Dow Jones Industrial Average posted its most significant single day point gain in history on Wednesday, with an advance of 1,086.25 points or 4.98 per cent to close at 22,878.45. 

The S&P also jumped 4.96% to finish the day at 2,467.70, its biggest gain since March 2009. The Nasdaq Composite had its best day since March 2009 following a 5.84 per cent rally to close at 6,554.36. 

According to experts, the rally was a surprise, but also very positive as they were watching for valuations after several days of declines. Besides that, market welcomed White House rumours that they are not planning the removing of Federal Reserve Chairman Jerome Powell and US Treasury Secretary Steve Mnuchin from their jobs. 

On the other hand, investors had two days of thinking after December 24th selloff where major indexes dropped around 2 per cent. So, they get back hungry to stocks on Wednesday.

Also, Christmas season always brings quieter than normal volumes in market, so the movements are more violent due to the lack of liquidity. It is expected the market will see another jump near to New Year's day. 

Barbara Kollmeyer, Market watch reporter, highlighted in a recent article that "the prevailing opinion right now seems to be that the 5% gain for the S&P 500 and equally biggish gains for the rest, amounts to nothing more than a sucker's rally. And that kind of market can work very well for experienced, quick-as-a-whip traders, but less great for retail investors."

Kollmeyer calls investors to be a lot more patient "than a kid at Christmastime" if they want to remain on market when stocks are ready to resume its uptrend. 

JPMorgan says stocks will rally in the first quarter of 2019

JPMorgan analyst Nikolaos Panigirtzoglou released a note saying that JPMorgan expects the first three months of 2019 will see stocks rally if the Federal Reserve does not hike rates in March again.

Panigirtzoglou affirms that "signs of capitulation by institutional investors are creating a window of opportunity for equity markets into Q1 assuming the Fed reacts to market stress."

On the other hand, "if such dovish shift does not materialise and the yield curve inversion fails to improve, any equity rally in the first quarter would most likely be short lived," Panigirtzoglou concluded.

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