The answer is a matter of perspective and speculation, but it sure looked pretty bad. Stocks, with no significant deviation between the Dow, NASDAQ, NYSE Composite, and S&P 500 companies took a major hit, or, rather, a series of heavy blows. Stocks were bludgeoned with regularity, flogged within an inch of their lives, only to be flayed again the following day without respect to any particular sector or class.
Monday was the only positive day of the week, with all the major indices closing nicely in the green. Tuesday was a nightmare, with the Dow dropping nearly 800 points and the other indices dragged down the same abyss. By virtue of the death of former president George H.W. Bush, current president, Donald J. Trump issued an executive order, closing all federal offices for a day of mourning, thus shutting down not just mail service and other government functions, but the financial markets as well.
After the surprise day off, traders got right back to selling again, whacking away with the same ferocity as on Tuesday, but, by mid-afternoon, a suspicious rally emerged, sending the S&P and NASDAQ into positive territory by the close, leaving the Dow with a minor loss of 79 points after it had been down more than 700 during the session. As many expected, the lift late Thursday was either short-term short covering or some button-pushing by the PPT (President's Working Group on Financial Markets... remember them?), setting up Friday for a major collapse of another 558 points on the Dow with the other indices following the lead lower.
What actually was behind the carnage was difficult to discern, as a convergence of events helped shape the worrying. Wrapping up the G20 meeting in Buenos Aires on Sunday, President Trump and China's president, Xi Jinping, announced a 90-day calling off period on new tariffs that were supposed to go into effect and increasing the percentages on others already in force on January 1. Those changes were postponed until March 31, with the intent of the two leaders to work out a framework for trade policy going forward. Markets were obviously pleased on Monday, but by Tuesday felt that a mere 90 days would not be enough to develop long-term policy for either nation.
Politics also is playing a role in the background, as Special Counsel Mueller's bogus "Russia collusion" investigation drags onward with the expectation that a final report will is forthcoming in the very near term. The corrosive political climate in Washington is not only a worry for those involved or tangentially aligned, but it's also having a somewhat chilling effect on investments. Nobody likes uncertainty, but especially so, Wall Street, and when it involves the highest levels of the federal government, the fear gauge goes bonkers and skepticism reigns.
On top of that, there's still a general perception that stocks are not just fully valued, but some are significantly overvalued. More than a few analysts have maintained that the effects of the Trump tax cuts are wearing thin, the federal government is running enormous deficits and a profits squeeze will be apparent by the end of the first or second quarter of 2019.
A minor inversion of the treasury yield curve occurred - almost without notice - on Monday, when the yield on the three-year bill rose above that of the 5-year note. On Tuesday, the 2-year joined in, and both the 2-and-3-year yields ended the week above that of the five. The 2-year closed out Friday at 2.72%, the 3-year the same, and the five-year at 2.70%. The 10-year note was last seen with a yield of 2.85%, and the 30-year down to 3.14%. Bond vigilantes were out in force, and the flight from stocks sent both short and longer-dated bonds soaring. While not quite the textbook inversion of the 2s-10s that have preceded every recession since 1955, the indications are not at all rosy.
Finally, on Friday, November's non-farm payroll data came in woefully short, with expectations of 198,000 jobs met with the reality of just 155,000 new jobs for the month.
The short explanation is that the bull market is getting awfully long in the tooth, the economy is set to slow down a bit in 2019, and the big money on Wall Street is heading for the hills, i.e., bonds and cash or cash equivalents. Dow Theory is about to signal a bear market. The Dow has already sent the signal with its close at 24,285.95 on November 23. Confirmation will come if the Dow Transports close below 9,896.11. It closed Friday at 9,951.16.
With the Fed's FOMC meeting scheduled for December 18-19, and the widely-accepted view is that the Fed will raise the federal funds rate another 25 basis points, there's more than one good reason to be getting out of stocks and those in the know - or at least those who think they know - have been scurrying like rats off a sinking ship.
With the S&P now in correction and the NASDAQ, NYSE composite and Dow Transports already having been there, only the Dow remains above the magic mark of -10 percent. All the major indices show losses for the year and the Dow is just a few hundred points from correction.
Elsewhere on the planet, the number of countries in which their stock markets are already down more than 10 percent continued to grow, with Germany's DAX just a shade above bear market status. That's a huge issue, since Germany is Europe's strongest economy. Given the angst over Brexit, the unwinding of the ECBs massive balance sheet, and Japan's upcoming announcement about the end of QE measures, the focus could easily be on Europe, as it will almost certainly be headed for a recession in 2019. Since Japan's been in something of a recessionary decline for the past 25 years, any slowing of growth on the island nation will barely elicit more than a yawn.
If Europe is about to fall over, the US will almost certainly follow. So much for Making America Great Again (MAGA). The disassembly of the globalist power structure, the rise of populism (marches and violent riots in France) and a global economy on its knees after 10 years of fake stimulus may all be leading to a recession that will have long-lasting and severe consequences.
So, yes, this was the week the wheels fell off.
Here's how the Traveling Wilbury's see it, with the cheery "End of the Line."
Happy Holidays!
Dow Jones Industrial Average December Scorecard:
| Date | Close | Gain/Loss | Cum. G/L |
| 12/3/18 | 25,826.43 | +287.97 | +287.97 |
| 12/4/18 | 25,027.07 | -799.36 | -511.39 |
| 12/6/18 | 24,947.67 | -79.40 | -590.79 |
| 12/7/18 | 24,388.95 | -558.72 | -1149.51 |
At the Close, Friday, December 7, 2018:
Dow Jones Industrial Average: 24,388.95, -558.72 (-2.24%)
NASDAQ: 6,969.25, -219.01 (-3.05%)
S&P 500: 2,633.08, -62.87 (-2.33%)
NYSE Composite: 11,941.93, -202.48 (-1.67%)
For the Week:
Dow: -1149.51 (-4.50%)
NASDAQ: -361.28 (-4.93%)
S&P 500: -127.09 (-4.60%)
NYSE Composite: -515.62 (-4.14%)
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