Earnings a Big Test for the Markets
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With your money briefing, I'm Charlie Turner in New York for The Wall Street Journal. Stocks rallied from earlier declines Friday, but the major averages ended a bit lower, snapping a five-day win streak. The Dow Jones Industrials lost five points, the Nasdaq Composite dropped 14, and the S&P 500 fell a fraction. Winning issues still topped losers overall, and it was a strong week for stocks, both the Dow and S&P, which climbed out of correction territory Thursday. gained more than 2% on the week. The Nasdaq added more than 3%. Akani Ohtani is markets reporter for The Wall Street Journal, and she joins us in our studio.
What drove this week's stock rebound despite the government shutdown?
Akani, the markets put in a pretty impressive performance this week, despite the government shutdown, which showed no signs of ending. First of all, why don't you tell us what drove the market gains?
Well, we really saw a rebound from what some investors had been saying looked like oversold conditions. The sell-off that we saw at the end of 2018 was really something, and I think it caught a lot of people off guard. I mean, as you know, we ended the year with the S&P 500's worst annual performance since 2008. So that kind of selling pressure, I think some folks were saying, was not warranted by the economic data that we were seeing in the U.S. I mean, it has been mixed. It has been volatile around the world. But generally, I think folks believe that we still have at least a year left of good, steady growth here. So to some extent, there was a little bit of people coming back into the market after a pretty dramatic sell-off.
Yeah, I mean, the Dow Industrials are up 10% since the low point on Christmas Eve, which was a terrible session. And they've risen about 7% over the past three weeks. I guess signs of a break in the frosty relations between the U.S. and China on the trade front and some fairly hopeful signs from the Fed on interest rates.
That's right. Those were two other developments that I think really encouraged investors in the past week. For one, the U.S. and China's agreeing to meet to discuss trade again, even though it didn't necessarily lead to a concrete resolution. It just signaled to investors that the two countries are still willing to talk about the issues that are at the table. And I think there was a little bit of relief that there wasn't a last-minute cancellation. And then with regards to the Fed, we saw more signs from Fed officials throughout the week that they're willing to take a gradual pace when it comes to rate increases this year. And that's a kind of messaging that we've been hearing more and more of in the last couple of weeks as the markets have really swung and we've seen economic data sort of coming in mixed.
And I think it's something that investors are really taking to because there was such an emphasis on the Fed last year and this real fear that they were going to move too quickly for the economy and for the markets. But we saw Fed Chair Powell really emphasizing that policy is not on a preset course and the central bank does have room to pause if the economy shows further signs of deteriorating.
I get the feeling that the Fed is paying attention to the markets.
Yeah. And it's something that Powell was not expected to necessarily be as sympathetic to as his predecessors. And he has said things along the lines that sort of suggest that the central bank is not there to just bail out the markets. They're there to really step in when the economy shows signs of fading a little bit. And that can include volatile periods of markets. But just because we see a 10% drop in stocks doesn't mean that the Fed is going to step in and make a sort of declaration about Its rate increases. So I think people were a little bit, I guess, relieved to find out that, you know, he is clearly watching and acknowledging the volatility in markets.
So is this sort of back to normal, a sign that investors are embracing risk again? The so-called risk-off trade is off the charts.
I think we'll still have to wait and see. Through the trader's notes that I've been getting, there is a sense that we have found a little bit of a bottoming out process in the last couple of days.
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