Stocks take breather, but risks circle

By Aimee Picchi

/ MoneyWatch

The signs of a bear market

Stocks were mixed Friday after moving higher in morning trade, with investors taking comfort in remarks by a Federal Reserve official. New York Federal Reserve Bank President John Williams told CNBC that policymakers are listening "very carefully" to concerns about the potential impact of slowing U.S. economic growth on financial markets.

Equities fell sharply in the two sessions that followed the Fed's move on Wednesday to hike interest rates, with investors worrying that the central bank would persist with its tightening campaign despite signs the economy is cooling.

The S&P 500, Dow and Nasdaq were largely flat as of 11:19 a.m. Eastern time. The respite may be short, however, with a slew of risks shadowing stocks.

Many stock markets are on track to end 2018 more than 10 percent lower than where they started, with some actually poised to record their worst December since the 1930s. The tech-heavy Nasdaq has sunk more than 19 percent from its highest point this year, placing it on the verge of a bear market, which is marked by a decline of 20 percent from a recent high.

Over the past few years, stock markets in December have generally ended the year strongly in what's known as a "Santa Claus rally."

"Heading as we are to potentially the worst monthly December performance for U.S. equity markets since the 1930s, it would be easy to think that we could well be heading for further heavy declines," said Michael Hewson, chief market analyst at CMC Markets.

"The truth is, we've become spoilt over the last nine years by markets that have steadily gone higher without too much of a correction, and the prospect of further tightening of monetary conditions will mean that investors will have to be much more discerning about where they put their money as we head into 2019," he said.

Economic worries

Over the past year, stocks have been roiled by a number of issues, including the U.S-China trade spat. But as the year has closed out, worries over the pace at which the Federal Reserve will raise interest rates next year have loomed large.

Earlier this week, the Fed raised interest rates for the fourth time this year and signaled that more increases are likely next year. Investors were disappointed that Fed Chairman Jerome Powell failed to indicate a more marked slowdown in the pace of rate hikes, given concerns over the state of the U.S. economy.

"Record highs to correction territory and flirting with a bear market — those that aren't already there that is — it really has been an extraordinary quarter that's got investors very concerned about the year ahead," said Craig Erlam, senior market analyst at OANDA.

"The list of headwinds has been growing throughout the year," he said.

What stocks are saying

The stock markets are struggling even as the U.S. economy is on track to expand at the fastest pace in 13 years. Markets tend to move, however, on what investors anticipate will happen further out.

"First, the bond market and investment growth are usually first to turn, often a year or more before the peak in the cycle," noted Simon MacAdam, global economist at Capital Economics, in a research note. "Second, falling equity prices and consumer confidence typically occur within the year prior the cycle peak."

Last, labor markets are impacted, which tends to be a lagging indicator, he noted. In other words, even though unemployment is low and the labor market is strong, investors are conveying their bearish outlooks about future growth.

Shadows of 1987 and 2008?

Investors are looking for signs of what may come next, including whether this month's downturn could signal worse to come. The percentage of stocks hitting new 52-week lows has reached 38 percent of those on the Nasdaq and New York Stock Exchange, according to Bloomberg News.

There have only been a handful of days when a larger share of stocks traded at 52-week lows, and they were all in 1987 and 2008, Bloomberg noted, citing Sundial Capital Research. Those years, of course, were notoriously rough for stocks, with 1987 marking the "Black Monday" market crash and 2008 witnessing the market meltdown and the start of the recession.

— With reporting by The Associated Press and Irina Ivanova.

First published on December 21, 2018

© 2018 CBS Interactive Inc.. All Rights Reserved.


Stocks take breather, but risks circle

Nasdaq on cusp of bear market amid investor jitters over economic growth, Fed policy and trade

updated 6M ago

Shutdown deadline hours away – live updates

The midnight Friday deadline to avoid a shutdown is rapidly approaching, and a path to keep the government open is unclear

updated 21M ago

10-year-old boy's dream to join prestigious choir comes true

For months, we have followed along as 10-year-old Gabriel Beckett competes to become one of "America's ambassadors of song"

updated 28M ago

Fiancé arrested month after Colorado mom disappeared

There was no word Friday morning on the charges Patrick Frazee may face

updated 3M ago

Welcome to winter solstice, the shortest day of 2018

The solstice gets an entire day of recognition, but it actually happens in an instant

1H ago

Shutdown deadline hours away – live updates

The midnight Friday deadline to avoid a shutdown is rapidly approaching, and a path to keep the government open is unclear

updated 21M ago

The Takeout: A CBS News original political podcast

“The Takeout” is a weekly podcast about politics, policy and pop culture hosted by CBS News Chief White House correspondent Major Garrett

4H ago

The final straw that triggered Mattis to resign

Lawmakers from both parties voiced concerns and criticism about the defense secretary's abrupt resignation

1H ago

Mac Thornberry says military funds shouldn't go to wall

Congress needs to "adequately fund border security," Thornberry told Major Garrett on "The Takeout" this week, as a partial government shutdown threatens in the weekend before Christmas

4H ago

Most Americans don't support building the wall

Fifty-nine percent of Americans oppose building a border wall between the U.S. and Mexico

3H ago

Pope to sex abusers: "Hand yourself over… and prepare for divine justice"

"They shamelessly conceal a vicious wolf ready to devour innocent souls," Francis says

2H ago

Video allegedly shows university students' murder

Victims have been identified as 24-year-old Louisa Vesterager Jespersen of Denmark and 28-year-old Norwegian citizen Maren Ueland

1H ago

London's Gatwick Airport reopens after drones-related shutdown

Security increased after drones sightings prompted closing that affected tens of thousands of passengers during busy holiday season

7H ago

Tourists' alleged attackers pledged allegiance to ISIS

The victims' bodies were found by other tourists in a remote region where they were camping

16H ago

U.S. colleges pull sportswear tied to Chinese detention camps

Campus stores in Texas, Maine and Indiana among those suspending sales of Badger Sportswear linked to forced labor in China

17H ago

Ariana Grande, Cardi B star in Christmas "Karaoke"

Michael Bublé kicked off the holiday mashup of Darlene Love's classic, "Christmas (Baby Please Come Home)"

updated 1M ago

Andy Cohen announces he is having a baby

In a room full of "Watch What Happens Live" audience members and "real housewives," Cohen thanked his surrogate, "who is carrying my future"

3H ago

Review: In stunning "Cold War," love and music attempt to surmount Iron Curtain

Oscar-winner Pawel Pawlikowski's post-WWII romance between a sultry chanteuse and her musical director depicts the clash between politics and a passionate, artistic life force

3H ago

Jay-Z reportedly discouraging Scott from Super Bowl gig

Travis Scott is said to be in talks to play with Maroon 5 at the Super Bowl halftime show in Atlanta

18H ago

See the first trailer for "Men in Black" sequel

The new trailer shows Tessa Thompson's character's induction as Agent M

19H ago

Welcome to winter solstice, the shortest day of 2018

The solstice gets an entire day of recognition, but it actually happens in an instant

1H ago

In esports, players burn out young

"It's a whole other level of stress," one player told us. By their mid-20s, many have burned out

11H ago

Experts: Don't send sensitive info on Facebook Messenger

"I would not trust Facebook with any of my information in a million years," one cybersecurity expert told CBS News

19H ago

Amazon sent 1,700 Alexa recordings to wrong customer

Man who reportedly never used the company's virtual assistant received 1,700 recordings it had made of a stranger

Dec 20

Companies use VR to train employees for hostage situations, robberies

"VR takes your brain elsewhere…. It's basically like visualization on steroids"

Dec 20

Teen who sang during brain surgery recovering

Kira Iaconetti had to be awake and sing during the operation so her surgeon could pinpoint parts of her brain to protect so she could continue her singing career

updated 8M ago

Americans aren't getting taller, but are getting heavier

A new report highlights a growing trend in U.S. waistlines

16H ago

Healthiest and least healthy states of 2018

Check where your state stands in the new report's ranking

2H ago

Wegmans pulls cauliflower rice, stir fry mixes on E. coli fears

Grocery chain sold possibly tainted products this month in produce departments at nearly 100 stores in six states

Dec 20

NYC bill would let patients of abusive doctors amend birth certificates

A New York City Council member said the bill was inspired by a woman who wants a sex offender former doctor removed from her twins' birth certificates

20H ago

Stocks take breather, but risks circle

Nasdaq on cusp of bear market amid investor jitters over economic growth, Fed policy and trade

updated 6M ago

Instagram: Here's how to fight scammers

It can be hard to differentiate between small businesses trying to attract new customers and scammers trying to turn a quick buck

4H ago

Behind the wheel, and earning a tax deduction

If you drive your car for several reasons, you may be able to claim a valuable break on your federal return

4H ago

You bought your airline ticket, now pay to pick a seat

Seat selections are yet another way airlines boost profits, while creating confused and frustrated travelers

2H ago

Toys for Tots takes hit from Toys R Us closing

Donations in some areas down 25 percent from last year, though some other corporate sponsors are trying to help make up the difference

5H ago

Unsealed documents reveal new details about Mollie Tibbetts investigation

Four men were the subject of police interest at times during the five-week search for the Iowa student, the AP reports

19H ago

Deputy kills family, confesses over radio before turning gun on himself

The Florida school officer killed three relatives including his granddaughter, 6, before killing himself, sheriff says

Dec 19

Redskins safety charged with assault for fight caught on video

Police say Montae Nicholson and his girlfriend were involved in an argument that escalated into a physical assault

Dec 19

Senate passes bipartisan criminal justice bill

Senate voted Tuesday night to approve a sweeping criminal justice overhaul supported by President Trump

Dec 19

Woman in New York fights back, prevents her car from being stolen

Bronx mother Tihisha Jones gets street justice after stopping a suspected car thief in his tracks — and it was all caught on camera

Dec 18