So Close

U.S. markets fail to hold gains as rally falters, snapping five day win streak.

The Market Sum | Insight after the bell By Caleb Silver, Editor in Chief Wednesday's Headlines 1. U.S. markets break winning streak as gains fade into the close 2. FedEx shares fall 10% as company misses targets and loses a big customer 3. Tesla shares hit an all-time high 4. What happens after a year of massive gains like these? 4. The biggest stocks every year for the past 30 years Markets Closed Dow 28,239.28 -0.10% S&P 3,191.14 -0.04% Nasdaq 8,827.73 +0.05% VIX 12.58 +2.36% Bitcoin $7,183.44 +8.67% US 10-Yr Yield 1.924 +1.85%     Credits: Matthew Stockman / Getty Images   Markets Today U.S. markets couldn't hold onto gains and dipped into the red at the close, snapping a five-day win streak for the DJIA and S&P 500. The Nasdaq did manage to end in positive territory as tech stocks continue to grind higher. The euphoria around last week's verbal agreement of Phase One of a U.S.-China trade deal lost some steam today as investment strategists are now pointing to the fact that the details are still scarce, and nothing has been documented by either trade delegation. Chinese trade officials deferred questions about specifics of the agreement beyond their comments last Friday, which were fairly general. U.S. trade representatives said the details will be forthcoming in January when the agreement is expected to be signed. And so it goes... Headlines Groupe PSA and Fiat Chrysler Automobiles have agreed to a $50 billion merger. They will form the fourth largest carmaker by volume, and the third largest by revenue. The combined company is expected to have annual revenue of 170 billion euros, according to a joint statement published today. PG&E (PCG), the bankrupt California utility responsible for the California wildfires earlier this year, won court approval for a $13.5 billion settlement with victims. The pact with fire victims is the third and largest in a series of settlements aimed at putting a lid on damage claims from a series of blazes in recent years that left people dead, destroyed homes and businesses, and plunged PG&E into bankruptcy in January.  FedEx (FDX) shares fell 10% Wednesday after the company's disappointing earnings report Tuesday afternoon. Besides the later Thanksgiving holiday this year, the company said operating results declined due to "weak global economic conditions, increased FedEx Ground costs from expanded service offerings, the loss of business from a large customer (Amazon), a continuing mix shift to lower-yielding services, and a more competitive pricing environment." WeWork has received $1.75 billion in new financing from Goldman Sachs. The line of credit is part of SoftBank's $9.5 billion bailout, says Reuters, and the money will be available starting in January. A source added that $800 million in restricted cash will be freed up thanks to the letter of credit facility. Goldman lost $80 million on its stake in the co-working space provider in the third quarter. Tesla (TSLA) has said it will not be cutting the prices of its Model 3 sedans made in China next year, refuting a report from Bloomberg that said it is planning to slash costs by 20%. The statement was provided to Chinese newspaper The Beijing News.  Tesla shares did hit an all-time high today, rising 119% from its 2019 lows back in June of this year. The stock is up nearly 20% year-to date. Despite its skeptics, shares of the automaker have handily outperformed established competitors like Ford and GM over the past 5 years.   chart courtesy YCHARTS           chart courtesy LPL Financial    Will 2020 be a Dud for Markets? After a year of gains like we have experienced so far in 2019, many people are asking if 2020 will underdeliver, and if markets will sell off as investors take their gains and run. It's a reasonable question until you think about the fact that very few investors - retail or institutional - invest along the calendar year. On the contrary, investing timetables differ for everyone, but momentum is universal.    As it turns out, history shows us that when markets deliver absolute returns of 30% or greater in a given year, the following year's returns average better than 15%. The chart above, courtesy of Ryan Detrick of LPL Financial, shows that markets have been positive 10 out of the 12 times when absolute returns the prior year were 30% or more. That's a pretty good track record, and while it is in no way indicative of future performance, it does show us that even in investing, a body in motion tends to stay in motion (unless acted on by an outside force).     The Biggest Stock by Year We've written a lot about the outsized influence of mega-stocks like Apple, Microsoft, and Amazon. These trillion dollar companies are among the most widely held in index funds, ETFs, and mutual funds. They are also the heaviest components of the S&P 500. They can bring it up, or drag it down on any given day or year. Apple on its own is up 77% so far in 2019, which has certainly contributed to the S&P 500's 27% return since it is 4.5% of the market weighted index.   But, as Bianco Research points out in the chart above, heavy stocks are not a new phenomenon, and they are even less a factor now than they were in the 1960s through the 1980's. IBM was the Apple of its day, and for a long period of time. At its apex in 1969, it was 9% of the S&P 500. Big Blue isn't what is used to be, which is a good lesson for investors who tie themselves too closely to one or two stocks.     That said, the biggest stocks in the market - namely the FANMAG stocks (Facebook, Apple, Netflix, Microsoft, Amazon, and Google) have become enormous. Combined, they are bigger than the entire market caps of some of the biggest stock markets in the world, including those of Japan, the U.K., China and France, to name a few. That's yet another reason to diversify your portfolio outside of one country.     photo: Getty Images   Today in Financial Crime Bernie Ebbers (pictured above) the former Chairman and CEO of Worldcom, has been granted an early release from prison due to failing health after serving 13 years of a 25-year sentence for securities fraud. Ebbers, now 78, was convicted in March 2005 on nine felony counts for his role in the $11 billion fraud at WorldCom, one of the biggest accounting frauds in history. Worldcom filed for bankruptcy shortly after Ebbers stepped down in 2002 in what was the largest Chapter 11 bankruptcy in history.   Read more: Why Worldcom filed for bankruptcy More News: Goldman Sachs to Launch Robo Adviser Next Year Why Buffett's Berkshire Can Lead in 2020 Defying Bears Financial Sector Surge Confirms Technical Breakout chart courtesy YCHARTS     Defense tech company Leidos rose 4.6% today after it announced it was purchasing fellow defense tech firm Dynetics for $1.7 billion. Despite worries over the trade deal agriculture purchases, fertilizer firm Mosaic rose 4.0% today and agricultural chemical company Corteva rose 3.9%.     FedEx fell 10% today after it posted disappointing earnings and revenue numbers. This follows on from yesterday's drop when Amazon banned its 3rd party sellers from utilizing FedEx group shipping. Ulta Beauty fell 2.3% as it reorganized its leadership, promoting 3 new c-level executives. Word of the Day Insider Trading Insider trading is the buying or selling of a publicly traded company's stock by someone who has non-public, material information about that stock. Insider trading can be illegal or legal depending on when the insider makes the trade. It is illegal when the material information is still non-public.     Bettman/Getty Images   Today in History December 18, 1987 Today in 1987 Ivan Boesky was sentenced to three years in prison for conspiring to file false stock trading records. Boesky was a merger arbitrageur, meaning he bought stock in companies he thought were acquisition targets. The leveraged-buyout boom of the 1980's, financed by the burgeoning junk-bond market created by Michael Milken of Drexel Burnham, meant there were an enormous number of opportunities for arbitrage. Boesky would illegally buy inside information from the people working on the acquisition deal, and buy up stock in the company to be acquired days before the announcement. After Boesky's criminal associate Dennis Levine gave him up 1986, Boesky offered information on Michael Milken and other major financial criminals in exchange for a plea deal. Boesky eventually served 2 years of his prison sentence, paid $100 million in fines (and more in subsequent lawsuits), and was banned from the securities industry for life. The story of Milken and Boesky's fall was dramatized in the movie Wall Street, with Boesky giving the inspiration for the movie's most famous line with his 1986 graduation speech to the Berkeley School of Business,"Greed is all right, by the way, greed is healthy … You can be greedy and still feel good about yourself."   Source: https://www.investopedia.com/terms/i/ivan-boesky.asp How can we improve the Market Sum? Tell us at marketsum@investopedia.com Enjoy the Market Sum? 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