S&P 500, DJIA Up But International, Domestic Issues Still Threaten Stability

trading week

At the beginning of this trading week, as we scour the horizon for clues of new year’s market activity trends, the major U.S. index trackers are seeing sustained growth. The Dow Jones industrial average is up at around $23,500 and the S&P 500 has soared to $2545 after a low of around $2450 late last week.

Some jokers would say that market activity is based on the Federal Reserve not raising interest rates again this week. However, this tongue-in-cheek business aside, the market seems to be doing well with recent rate hikes, as well as the U.S./China trade situation as the two major superpowers resume talks in order to try to and simmering tensions on imports and exports.

Although there is work being done from both sides, analysts expect some continuing challenges – for instance, tying China down to its promises.

“With the U.S. and China having opened negotiations Monday to resolve their trade fight, a make-or-break issue stands in the way of any deal: How to ensure Beijing follows through on the offers it makes?” writes Lingling Wei today in the Wall Street Journal. “The Trump administration’s focus on how to enforce any deal with Beijing highlights what U.S. officials call China’s poor follow-up record. Instead, they said, hurdles for American and other foreign firms operating in China have grown over the years despite similar market-opening pledges Beijing has made over years of previous negotiations.”

Domestically, there is a bright spot on the government shutdown with some negotiations in play – as for the many hundreds of thousands of federal workers who are currently not getting paid, the market seems poised to disregard their despair and continue to climb after a dismal Christmas season. However, there is also news that federal workers are starting to look into options around looking out for number one, as in this coverage from The Hill:

“One of the country’s largest unions representing federal workers is suing the Trump administration over the government shutdown, claiming that it is illegal to require employees to work without pay,” wrote Own Daughterty Dec. 31. “The American Federation of Government Employees (AFGE) union released a statement on Monday announcing its lawsuit as the shutdown stretches past a week … The lawsuit, filed in the U.S. Court of Federal Claims, alleges that the federal government is in violation of the law by requiring some federal workers, many of which are represented by the union, to work without pay during the shutdown.”

We’ll keep looking at the index behavior in light of these contentious issues – to see what will move markets throughout the day and throughout the week.