Market week: New Year’s rebound

U.S. jobs report fuels stock surge

Fuelled by a blockbuster monthly U.S. payrolls report that saw 312,000 new jobs created in December, the big North American stock indices started recovering some of the losses suffered over the past couple of months. Intense volatility and souring market sentiment through the fourth quarter of the year was triggered by growing anxiety about the global economy, particularly the danger posed by a slowdown in the growth of the Chinese economy. The effects of the U.S.-China trade dispute, the hawkish tone of central banks, and the flattening yield curve generated one of the worst fourth-quarter stock market slumps in decades, dragging the main market gauges into correction territory and to a loss position for the year as a whole. Toronto’s S&P/TSX Composite Index especially felt the pain, as the price of crude oil plummeted 38% in the fourth quarter.

Index	Jan. 4, 2019, close	Day	Week	Year to Date	Dec. 31, 2018, close	Dec. 2018	Q4 2018	2018
S&P/TSX Composite	14,426.62	1.5%	1.44%	0.72%	14,322.86	-0.72%	-10.89%	-11.64%
S&P 500 Composite	2,531.94	3.4%	1.86%	1.00%	2,506.85	-0.99%	-13.97%	-6.24%
Nasdaq Composite	6,738.86	4.3%	2.34%	1.56%	6,635.28	-1.54%	-17.54%	-3.88%
Gold (US$)	$1,286.40	-0.7%	0.27%	0.52%	$1,279.70	-0.52%	7.06%	-2.26%
Oil (WTI) (US$)	$48.20	2.4%	6.33%	6.14%	$45.41	-5.79%	-38.18%	-24.84%

The S&P/TSX Composite Index ended the year down 11.6%, as the dominant energy sector felt the drag of a 24% annual decline in the price of crude oil. The S&P 500 Composite Index lost 6.2% and the Nasdaq Composite Index fell 3.8% in the year.

But the first week of January, shortened by the New Year’s Day holiday, saw something of a rebound, as a surge in U.S. hiring created 312,000 new jobs in December, far outpacing the 182,000 consensus estimates. The U.S. unemployment rate also ticked up to 3.9% in the month from 3.7% in November, as labor-force participation expanded. In addition, Federal Reserve Board Chairman Jerome Powell indicated some flexibility in rates, suggesting that December’s job creation isn’t raising concerns about inflation.

Buoyed by this positive news, investors went on a buying spree last week. The S&P 500 Composite Index advanced 1.9% on the week. Even the technology-weighted Nasdaq Composite gained 2.3% on the week, reversing a major decline on Thursday following an announcement from smartphone maker Apple Inc. (NASDAQ: AAPL) warning of a quarterly revenue decline, mainly a result of slower growth in China.

Toronto’s S&P/TSX Composite Index rose 1.4% on the week helped along by 9,300 new jobs created in December, a steady 5.6% unemployment rate, and a 6.3% advance in the price of crude oil on the week, which breathed some life into the energy sector.

FUND NEWS

* AIP shuts down funds. AIP Asset Management announced the termination of AIP Global Macro Class and AIP Canadian Enhanced Income Class following the sale of AIP Mutual Funds Corporation. The funds are expected to terminate on or about January 11, 2019.

* Harvest terminates European ETF. Harvest Portfolios Group Inc. announced that it will terminate Harvest European Leaders Income ETF (TSX: HEUR), with only $2.8 million in assets, as of the close of business on Thursday, March 21, 2019. Sales of units will end Friday, Jan. 25, and the last day for redemptions is expected to be Thursday, March 21. The ETF is expected to be delisted at the close of business on Thursday, March 21, and any remaining outstanding units will be subject to a mandatory redemption at that time.

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Disclaimer

The foregoing is for general information purposes only and is the opinion of the writer. No guarantee of investment performance is made or implied. It is not intended to provide specific personalized advice including, without limitation, investment, financial, legal, accounting or tax advice.