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Dow posts worst weekly performance in a decade, Nasdaq enters bear market

U.S. stocks plunged Friday, extending a crushing week of declines for the major equity indices.

The S&P 500 (^GSPC) fell 2.06%, or 50.76 points, as of market close and is down 7% this week. This was the worst week for the S&P 500 since August 2011.

The Dow (^DJI) slid 1.82%, or 417.11 points. The index fell 6.75% for the week, posting its worst weekly decline since October 2008. 

The Nasdaq (^IXIC) tumbled 2.99%, or 195.41 points, to 6,332.99 points. The index is now solidly in a bear market, or more than 20% off its August 29 high of 8,109.69 points. The Nasdaq fell 8.29% this week, marking the worst weekly performance for the index since November 2008. 

Equities initially jumped and then reversed course following comments from a key Federal Reserve official suggesting that the central bank is open to shifting its views on rate hikes for next year. John Williams, president of the Federal Reserve Bank of New York, said in an interview with CNBC that the Fed is open to “reassessing” its views on the economy and on future rate hikes, “listening to not only markets but everybody that we talk to, looking at all the data and being ready to reassess and reevaluate our views.” Stocks initially jumped following the remarks, with the S&P 500 climbing 1.5% to a session high.

The Fed’s decision on Wednesday to raise the benchmark interest rate, coupled with comments from Fed Chairman Jerome Powell suggesting the bank would barrel ahead with its current balance sheet reduction program, had sent stocks tumbling. Williams’ comments pointed to the Fed’s willingness to reconsider its balance sheet policy, which currently allows for runoff of $50 billion in assets per month.

“I think his main message is that the statement was trying to convey a more dovish message,” Neil Dutta, head of U.S. economics at Renaissance Macro Research, said in an email about Williams.

Meanwhile, investors are digesting the prospect of a government shutdown. The U.S. government will experience a partial shutdown affecting a number of major agencies if a continuing resolution to provide funding is not inked before midnight. President Donald Trump said Friday morning that a government shutdown would last “for a very long time” if a new spending measure omits his request for billions of dollars in funding for a border wall. A House of Representatives bill passed Thursday includes the $5 billion in funding for the wall, while the Senate version of the measure passed on Wednesday omitted the funds.

U.S. Defense Secretary Jim Mattis resigned on Thursday, the day after Trump’s plans to withdraw troops from Syria became public. The U.S. Dollar index (DX-Y.NYB) rose following his resignation, which has prompted speculation of a ramp up in “America First” policies. Mattis noted in his resignation letter that the strength of the U.S. is linked to the strength of its global alliances.

Meanwhile, oil prices extended declines. U.S. crude oil prices (CL=F) fell 29 cents to $45.59 per barrel as of Friday’s settlement, the lowest closing price since January 2016. Prices for the commodity are now down more than 40% over the past 56 trading days.

Quadruple witching takes place for the fourth and final time this year on Friday. This is a phenomenon that occurs on the third Friday in March, June, September and December. During quadruple witching, market index futures, market index options, stock options and stock futures expire on the same day, which tends to result in heightened trading volume. As of 11:48 a.m. ET, New York Stock Exchange volume was seven standard deviations above average.

ECONOMY: Third-quarter GDP reading ticks down, Durable goods orders disappoint in November

The U.S. economy grew at a 3.4% rate in the third quarter, slightly below previous estimates of 3.5%, according to the third print on gross domestic product released Friday.  In the second quarter, real GDP increased 4.2%. With the third estimate for the third quarter, personal consumption expenditures and exports were revised down, while private inventory investment was revised up, according to the statement. The consensus belief among economists is that economic growth is slowing in the fourth quarter to about 2.5%.

Traders work on the floor at the closing bell of the Dow Industrial Average at the New York Stock Exchange on December 19, 2018 in New York. (Photo by Bryan R. Smith / AFP) (Photo credit should read BRYAN R. SMITH/AFP/Getty Images)

New orders for manufacturing durable goods increased 0.8% in November, missing consensus estimates of a 1.6% pace of growth, according to Bloomberg data. This follows a decrease of 4.3% in October. Excluding transportation, durable goods orders fell 0.3%, whereas consensus expectations had called for an increase of 0.3%. Excluding defense orders, new durable goods orders fell 0.1% in November, following a 1.4% decrease in October.

Non-defense new orders for capital goods excluding aircraft fell 0.6% in November, reversing a 0.5% increase in October. Shipments for non-defense capital goods excluding aircraft fell 0.1% in November, also reversing a rise of 0.8% in October.

Personal income rose 0.2% in November, missing consensus expectations of a 0.3% increase. However, personal spending increased 0.4% for the month, outpacing expectations by 10 basis points, according to a release from the Bureau of Economic Analysis on Friday. The core personal consumption expenditures price index, a preferred Federal Reserve inflation measure that excludes food and energy prices, rose 0.1% for the month of November, the same pace of increase as in October. Year-over-year, the core PCE index rose 1.9%, close to the Fed’s target of 2%.

The University of Michigan’s consumer sentiment index rose to 98.3 in December from 97.5 in November, and exceeded expectations of 97.4 for the month. The sentiment index averaged 98.4 in 2018, marking the best year since 2000’s average of 107.6.

“Surprisingly, even in the last week of the survey, falling stock prices were reported by just 12% as a primary concern about recent economic developments,” Richard Curtin, chief economist for the surveys of consumers, said in a statement. “This may reflect their initial dismissal as another indication of the heightened volatility of stock prices, and not signal an emerging downtrend. While next month’s data may reflect increased concerns, it has been news of changing job and income prospects that have been of the greatest concern to consumers.” 

 STOCKS: Nike surges on strong earnings, Citi downgrades Altria’s stock

Nike’s stock (NKE) rose after the athletic shoe and apparel maker delivered quarterly results on Thursday afternoon that beat expectations on the top and bottom lines, improved its gross margins and posted strong sales in North America and China. Adjusted earnings were 52 cents per share on revenue of $9.37 billion, blowing past consensus estimates of 46 cents a share on revenue of $9.37 billion. Company executives noted on a conference call that Nike’s digital business in North America increased 30% for the quarter ending in November. Shares of Nike rose 7.17% to $72.37 per share as of market close.

CarMax (KMX) beat expectations for quarterly earnings but missed on revenue and same-store sales in results released Friday morning. Net sales and operating revenue were $4.3 billion, slightly below estimates of $4.32 billion. Used vehicle same-store sales, a key metric for retailers, declined 2.1%, although total used vehicle sales increased 2.3%. Net earnings came out to $1.09 per share, 9 cents better than expected. Shares of CarMax rose 4.02% to $59 each as of market close.

Altira (MO) had its stock downgraded to Sell from Neutral by Citi after the tobacco producer took a 35% stake in e-cigarette company Juul. Citi’s price target was lowered to $45 for shares of Altria from $67 previously. Citi analysts said in a note that the deal signals that Altria is uncertain about the future of its core cigarette business. Morgan Stanley analysts, on the other hand, said the deal could be a strategic hedge for Altria’s cigarette business, while acknowledging the $12.8 billion deal comes at a high cost for the company. Morgan Stanley kept an Equal Weight rating for shares of Altria with a $54 price target. Shares of Altria fell 2.76% to $49.05 each as of market close.

Shares of Perrigo (PRGO) slumped after Irish tax authorities slapped the over-the-counter drugmaker with an unexpected $1.9 billion tax assessment, one of the largest demands in the country’s history. The Dublin-based company said it plans to appeal the decision, which is based on a 2013 intellectual property sale. Shares of Perrigo plummeted 29.26% to $37.04 each as of market close.

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

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