The Dow Jones Industrial Average's Free Fall Ends, but 3 Threats Remain

The Dow Jones Industrial Average may be coming out of its slide. The Dow Jones projected a 136-point gain in pre-market hours as the stock market free fall stops.

At least for now.

Investors continue to eye three potential catalysts that could send stocks even lower. Economic growth and corporate profits are starting to slow down, the trade war with China continues to threaten growth, and the Fed could hike interest rates again this week. More on these threats below, plus one earnings report we're keeping a close eye on...

Here are the numbers from Monday for the Dow, S&P 500, and Nasdaq:

Index Previous Close Point Change Percentage Change
Dow Jones 23,592.98 -507.53 -2.11%
S&P 500 2,545.73 -54.01 -2.08%
Nasdaq 6,753.73 -156.93 -2.27%

Now, here's a closer look at today's Money Morning insight, the most important market events, and stocks to watch.

The Top Stock Market Stories for Tuesday

  • dow jones industrial averageThe Dow Jones is off to its worst December start in 38 years, while the S&P 500 has seen its worst start to the month since the onset of the Great Depression. Markets remain in a slump amid concerns about slowing economic growth, rising interest rates, and ongoing tensions between the United States and China. Many top names are calling on the U.S. Federal Reserve to avoid the temptation of raising interest rates at its meeting this week. However, markets anticipate that the U.S. central bank will hike rates for the fourth time in 2018 as the Fed aims to tame inflation.
  • Ahead of the Fed's rate move, investors are reacting to a critical speech delivered today by Chinese President Xi Jinping. On the 40th anniversary of China opening its economy to the world, President Xi, who also runs the Communist Party of China's Central Committee, spoke on national reforms and called for reunification with Taiwan. President Xi promised in his speech that China's economy will produce "miracles that will impress the world" in the years ahead. Despite the lofty promises, Xi's highly anticipated speech failed to offer too many details. The speech comes at a time that China's debt has exploded, its relationship with the United States on trade has deteriorated, and economic and social problems continue to mount internally.
  • Oil prices continued to fall this morning, with WTI crude oil prices falling another 2.8%. The benchmark crude price now sits at $48.45 per barrel thanks to growing concerns about oversupply and the continued sell-off in energy stocks. Russian oil production hit a record 11.42 million barrels per day this morning, according to Reuters. Meanwhile, U.S. shale production will to hit more than 8 million barrels per day by the end of the month, according to the Energy Information Administration. With production on the rise, concerns about demand and global economic growth are battering commodity prices. The sharp downturn continued for Brent crude as well, which fell 4% today to $57.20 per barrel.

Money Morning Insight of the Day

At the American Cannabis Summit - the first-ever nationwide event for cannabis investors - former Speaker of the House John Boehner revealed why he's going ALL IN on marijuana... and exactly how ordinary Americans can make a fortune from this hundred-billion-dollar industry. To see a special rebroadcast of this historic event, click here.

Stocks to Watch Today: CBS, FDX, LMT

  • CBS Corp. (NYSE: CBS) is making noise this morning after the company announced it will not pay its disgraced former CEO a $120 million severance package. Les Moonves won't receive his nine-figure severance after the firm's board of directors concluded that he had violated sexual harassment policies and refused to cooperate with an internal investigation into related allegations.
  • Lockheed Martin Corp. (NYSE: LMT) investors are cheering news that Japan will bolster its spending with the military supplier. As Japan's government faces increased pressure from the Chinese government, the country will spend another $10 billion on F-35 jet fighters. According to reports, Prime Minister Shinzo Abe approved a deal that will increase the number of jets ordered from 42 to 147. The deal complements a series of defense plans that will see Japan produce aircraft carriers for the first time since World War II.
  • In earnings news, FedEx Corp. (NYSE: FDX) will look to reverse its 24% drop in share price since the beginning of the year. Concerns about slowing economic growth, competitive pressures from Inc. (NASDAQ: AMZN), and the retirement of its CEO David Cunningham have created a perfect storm for FDX investors. Analysts expect that the company will report earnings per share of $3.96 on top of revenue of $17.76 billion.
  • Look for earnings reports from Micron Technology Inc. (NASDAQ: MU), Darden Restaurants Inc. (NYSE: DRI), FactSet Research Systems Inc. (NYSE: FDS), Jabil Inc. (NYSE: JBL), and Steelcase Inc. (NYSE: SCS).

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About the Author

Garrett Baldwin is a globally recognized research economist, financial writer, consultant, and political risk analyst with decades of trading experience and degrees in economics, cybersecurity, and business from Johns Hopkins, Purdue, Indiana University, and Northwestern.

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