Stocks Drift as Holidays Approach

Dec. 20, 2019 - This was a pretty quiet week in markets. This was likely to be expected as three of the major market-moving news stories of 2019, trade war, Brexit and the Federal Reserve, reached near-term resolutions last week.

There are still open questions about all three, with trade and Brexit likely becoming prominent stories again as soon as January, but for now, it seems like things should be pretty quiet as we head into 2020.

Market-wide volumes were pretty light next week, and two market-closing holidays in the next two weeks, that trend is unlikely to reverse itself until the week of Jan. 6.

This week's biggest news, in the stock market anyway, was earnings reports from a couple of Dow Jones Industrial Average components. Nike (NKE) and FedEx (FDX).

FedEx's quarterly report was pretty bad, and the stock got hit hard. The company blamed global economic weakness and also cited some higher costs, but the real damage was done by Amazon (AMZN). Amazon is no longer using FedEx Ground for deliveries, using both a combination of its own nascent delivery service and FedEx competitors. Residential delivery has been a growth area for shippers as the document delivery business has dried up. Residential delivery has much lower margins though and the loss of a customer with the scale of Amazon is a big blow.

Nike meanwhile, made the decision to separate itself from Amazon. This was largely do to the prevalence of fake or unauthorized Nike merchandise on the online site. The company just missed estimates for gross margin, but otherwise turned in a solid report. Forward guidance is a little flatter than some had expected, but generally the company seems OK. If Nike can beat those estimates and show that it can thrive without Amazon, it is possible that other companies could make a similar attempt at leaving Amazon behind.

The calendar for the next few weeks is pretty light, so hopefully, we won't see much in the way of volatility during the holiday season.

This is our last installment for 2019. It was good year for stocks, but a caveat. Stock prices are a continuous data series. Most investors care about the prices when they open a position and the price when they close. Selecting time periods outside of those two events are ultimately meaningless and a little bit arbitrary. The S&P 500 gained 28.5% from the close on Dec. 31, 2018 through today. Worth remember though is that the fourth quarter of 2018 was miserable until things bottomed out on Christmas Eve. So yes, stocks have gained 28.5% year to date, but are up 10.2% since the start of the fourth quarter of 2018.

Going into 2020 at all-time highs is great, but makes it much hard to spend nearly the entire year with double-digit year-to-date gains.

Indices

S&P 500

Six Months