Stocks traded little changed on Tuesday as Wall Street wrapped up a banner year that saw equities surge to record highs, overcoming concerns about the economy and a trade fight with China.
The S&P 500 and Nasdaq Composite both hovered just below the flatline. The Dow Jones Industrial Average traded 35 points lower, or 0.1%. Consumer staples and industrials were the biggest laggards in the S&P 500, sliding at least 0.3% each. Boeing and Merck led the Dow lower, falling 0.6% and 0.5%, respectively.
The major averages remained on track for strong annual gains. The S&P 500 was up 28.4% for 2019, on pace for its biggest one-year gain since 2013, when it rallied 29.6%. The Nasdaq was also on track for its best one-year performance in six years after rallying 35% in 2019. The Dow rose 21.8% in 2019, its best annual performance since 2017.
“We climbed a wall of worry, from a growth slowdown and profits flat at best, trade concerns, potential impeachment, and high valuations bothering investors — including myself,” said Ned Davis, founder of Ned Davis Research, in a note.
Stocks surged in 2019 despite the ongoing U.S.-China trade war as the Federal Reserve cut rates three times while consumer sentiment remained high. Trade tensions also declined in the fourth quarter after China and the U.S. agreed to sign a so-called phase one trade deal.
“That one’s in the bank,” White House advisor Peter Navarro told CNBC’s “Squawk Box” on Tuesday, referring to the phase-one agreement. “We’re just waiting for the Chinese translation of the 86-page agreement and I’m trying to figure out whether it’s going to be more pages or less in Chinese.”
President Donald Trump later said he will sign the agreement on Jan. 15 at the White House.
“By any objective measure US large cap stocks start 2020 on perilous footing. Valuations are rich. Corporate debt levels are at record highs,” said Nicholas Colas, co-founder of DataTrek Research, in a note. “But… we know the Federal Reserve has learned its lesson. It will be quick to ease if necessary and slow – very slow – to raise rates.”
“Further, the US economy is in good enough shape to limit voter appetite for dramatic changes to economic policy,” he added. “All this should be enough to generate 5-6% corporate earnings growth in the 2nd half of 2020. That’s when the easiest comps to 2019 appear; the 1st half is somewhat harder.”
Apple and Microsoft led the way higher for stocks in 2019, rallying 85.3% and 54.7%, respectively. They are the best-performing Dow stocks of the year and accounted for about 15% of the S&P 500’s overall gains for 2019.
Chipmakers Advanced Micro Devices, Lam Research and KLA Corp. were the best-performing S&P 500 stocks in 2019. AMD and Lam Research both rose more than 100% for the year while KLA surged 98.4%. Retailer Target and fast-casual dining chain Chipotle Mexican Grill also rallied more than 90% this year.
Tuesday also marked the final trading day of the decade. Over the past 10 years, the S&P 500 has surged more than 188%. The broad index’s total return — which includes dividends — tops 255% for the decade.
—CNBC’s Silvia Amaro contributed to this report.
