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Stocks pare gains to close narrowly in the green

U.S. stocks ended higher Tuesday after another choppy session. The S&P 500 had closed at its lowest level since October 2017 on Monday.

The S&P 500 (^GSPC) rose 0.01%, or 0.21 points, as of market close, after rising as much as 1.1% earlier in the session. The energy sector led declines as U.S. crude oil prices tumbled 7.3% to settle at $46.24 per barrel, the lowest since the end of August 2017. The consumer discretionary sector outperformed.

The Dow (^DJI) edged higher by 0.35%, or 82.52 points, while the Nasdaq (^IXIC) rose 0.45%, or 30.18 points.

Global equities posted a weak performance on Tuesday. Stocks in Asia wallowed in the red after China’s President Xi Jinping delivered an 80-minute speech promising that China’s economy will produce “miracles that will impress the world,” but failed to provide specifics on plans to address China’s slowing growth, rising debt or the trade war. Europe’s major indices also slipped.

The U.S. Federal Open Market Committee kicks off its latest meeting Tuesday. The Federal Reserve will announce its final monetary policy decision of the year at the conclusion of the meeting Wednesday. Policymakers are widely expected to raise the benchmark interest rate by 25 basis points, marking the fourth rate increase this year. Investors will be paying more attention to the FOMC’s tone for the path forward for monetary policy, which will be reflected in its latest policy statement and in Fed Chairman Jerome Powell’s statements to the press Wednesday afternoon.

“We expect the message to be that the Fed remains upbeat on the outlook and expects to raise rates further in the coming quarters,” analysts from Deutsche Bank said in a note. “But that pace of normalization is likely to slow next year from its recent quarterly rate as the path forward becomes more data dependent.”

Analysts from TD Securities noted that the “key factors that will determine when the Fed hikes in 2019 include the inflation outlook, which has softened recently, as well as the evolution of risks around trade policy, fading stimulus and slowing global growth.”

“We expect the Fed to keep an eye on financial conditions as well, but not attempt to put a floor under risk assets,” they added.

President Donald Trump wrote a pointed Twitter post to Fed policymakers on Tuesday, warning them not to make a “mistake” at their meeting. This follows a series of public attacks on the Fed over its recent path of rate hikes.

“I hope the people over at the Fed will read today’s Wall Street Journal Editorial before they make yet another mistake,” Trump said in the post. “Also, don’t let the market become any more illiquid than it already is. Stop with the 50 B’s. Feel the market, don’t just go by meaningless numbers. Good luck!”

Trump’s tweet apparently refers to the Wall Street Journal’s “Time for a Fed Pause” published Monday evening. The “50 B’s” may be a reference to the Fed’s current policy of allowing a maximum of $50 billion in bonds run off without reinvestment per month in an effort to reduce its balance sheet.

Treasuries on the long end of the yield curve ticked down on Tuesday before policymakers were set to meet. The yield on the 10-year Treasury note fell 3.1 basis points to 2.826%, while the yield on the 30-year note fell 3.5 basis points to 3.079% as of 4:04 p.m. ET.

STOCKS: CBS withholds Les Moonves’s severance package, Johnson & Johnson announces $5 billion buyback program

CBS (CBS) will withhold former CEO Les Moonves’s $120 million severance package after the company completed an investigation into sexual harassment allegations against the former executive, the CBS board said in a statement Monday. According to the statement, Moonves breached his employment contract, violated company policies and failed to cooperate fully with the company’s investigation. Shares of CBS fell 1.35% to $46.19 each as of market close.

Shares of Tilray (TLRY) surged after the Canadian cannabis company said it entered a partnership with Swiss pharmaceutical giant Novartis AG (NVS, NOT.DE) to develop and distribute medical marijuana in legal jurisdictions globally. The agreement builds on an existing alliance with Sandoz Canada, a subsidiary of Novartis, which had been signed in 2017. The latest deal will expand the agreement to allow Tilray to sell to the about 35 countries worldwide that have currently legalized medical cannabis. Shares of Tilray jumped 16.1% to $76.50 per share as of market close.

Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., December 14, 2018. REUTERS/Brendan McDermid
Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., December 14, 2018. REUTERS/Brendan McDermid

Johnson & Johnson (JNJ) announced a $5 billion share buyback program in the wake of a Reuters report that the company knew for decades that its talc baby powder contained asbestos. Shares of J&J tanked after the report, wiping out more than $50 billion in market value for the company over just two trading sessions. In addition to announcing the buyback program, the company also reaffirmed its full-year sales guidance of $81 billion to $81.4 billion and earnings guidance of between $8.13 to $8.18 per share. Shares of J&J rose 0.98% to $130.41 each as of market close.

The Boeing Company (BA) said on Monday that its board voted to raise its quarterly dividend 20% to $2.055 per share in 2019 and approved a $20 billion stock buyback program, replacing its current authorization of $18 billion approved in 2017. Shares of Boeing, a major component of the Dow index, rose 3.83% to $328.24 each as of market close.

Darden Restaurants (DRI), the parent company to chains including Olive Garden, topped Wall Street’s expectations for earnings and same-store sales metrics but missed on revenue for the fiscal second quarter of 2019. Earnings per share of 92 cents beat estimates by a penny, while revenue narrowly missed at $1.97 billion versus $1.98 billion expected for the quarter. Same-store sales, a key metric for restaurants, grew 2.1%, beating analyst estimates of 2%. Darden also raised its full-year forecast for full-year earnings to between $5.60 and $5.70 per share. Shares of Darden rose 5% to $103.84 each as of market close.

ECONOMY: Housing starts jump, building permits hit 7-month high

Housing starts rose to an annualized pace of 1.256 million in November, topping expectations of 1.228 million and the previous month’s downwardly revised reading of 1.217 million new authorizations, the Commerce Department said Tuesday. Residential starts rose 3.2% to an annualized pace of 1.26 million, following a 1.22 million pace in the month-prior, which was revised slightly lower. Single-family starts, however, fell 4.6% to an 824,000 annualized pace, the lowest level since May 2017.

Building permits, a proxy for new homebuilding, rose 5% in November to an annualized rate of 1.328 million, marking a 7-month high. Consensus expectations had been for an annualized pace of 1.26 million.

In short, starts and permits were both stronger than expected, although strength was led by more volatile multifamily units. Single-family starts fell, while single-family permits were little changed,” Jim O’Sullivan, chief U.S. economist for High Frequency Economics, wrote in a note Tuesday. “Through the volatility, the data continue to show some weakening, albeit not to the degree implied by the housing market index in recent months.”

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck

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