Published: Dec 18, 2018 3:32 p.m. ET
All three major benchmarks reverse earlier gains
Is the Market Fearless? U.S. stocks were trading flat in the final hour of exchange Tuesday, with all three major benchmarks turning negative after attempting a modest rally earlier in the day, and as investors remain laser-focused on the Federal Reserve, which begins its final policy meeting of the year Tuesday, with a policy announcement set for Wednesday.

How are benchmarks performing?
The Dow Jones Industrial Average DJIA, +0.35% edged up 40 points, or 0.2%, at 23,640, while S&P 500 index SPX, +0.01% was down 4 points, or 0.2% at 2,541. The Nasdaq Composite Index COMP, +0.45% climbed 18 points, an ascent of 0.3%, to 6,774.

All three benchmarks are off their early morning highs, when the Dow climbed as high as 335 points, the S&P 28 points, while the Nasdaq rose 83 points, at its highest.

Read: Here’s why the Fed won’t save the stock market, despite its worst December start since 1980

What’s driving the market?
Persistent fears that sluggish global growth will wash up on U.S. shores continues to unsettle investors, and has resulted in the worst equity market selloff in recent memory, underpinned by rising interest rates and trade-war jitters.

That downdraft comes as the Federal Open Market Committee is set to conclude its final rate-setting gathering of 2018 on Wednesday. While the market is fixated on the pace of rate hikes in 2019, investors expect a 25 basis point increase in the benchmark rate at the meeting.

CME Group data, gauging Federal-funds futures, indicate a 71.5% likelihood for the rate increase to a range of 2.25%-2.50%. This figure has fallen from 75.8% just one week ago, and investor uncertainty over the Fed’s next move has been fueled by calls for the Fed to decline to raise rate, with the most recent coming in the form of a Wall Street Journal editorial published Tuesday morning.

President Donald Trump has also been a consistent proponent of halting interest-rate increases, and he took to Twitter again Tuesday morning to promote the Journal editorial.

Potentially more important that the decision to raise rates will be Fed’s communication strategy, including the statement it issues to accompany the interest-rate decision, as well as a news conference at 2:30 Wednesday, where Federal Reserve Chair Jerome Powell will discuss future interest rate hikes.

Meanwhile, Chinese leader Xi Jinping, speaking at an event to commemorate the 40th anniversary of China‘s economic reforms, called for China to “stay the course” on economic reforms, adding a defiant note that “no one is in a position to dictate to the Chinese people what should or should not be done,” an apparent reference to the continuing tariff spat between Beijing and Washington, led by President Donald Trump’s administration.

What are analysts saying?
“Equities are down, and I think they have a lot further to go,” Larry Benedict, CEO of the Opportunistic Trader told MarketWatch.

He said that whatever relief the Fed may provide markets tomorrow will be overwhelmed in the final trading days of 2018 by other factors, like extremely negative sentiment, tax-motivated selling, and a “triple witching” day coming later this week, when contracts for stock index futures, stock index options, and stock options all expire on the same day, which will force traders to close out positions and will raise stock market volatility.

A worsening global economy is reason that markets continue to struggle for altitude. The S&P 500 is “only down 7% on the year. Markets abroad are down twice that or more,” Benedict said. “We’re the only market that hasn’t gotten annihilated.”

“Today feels like one of those oversold bounces,” Yousef Abbasi global market strategist with INTL FCStone told MarketWatch.

He predicted that markets may drift higher this afternoon ahead of what investors predict will be a dovish hike from the Fed tomorrow, “but in terms of the broader outlook, it is hard to imagine this market rallying with any sort of fervor and retaining those gains,” he said, because there is just too much uncertainty regarding global growth and trade policy.

What data are traders watching?
U.S. home builders began construction at a seasonally-adjusted annual rate of 1.26 million homes in November, above the 1.23 million expected, according to a MarketWatch poll of economists.

New building permits in November were issued at a seasonally adjusted annual rate of 1.33 million, versus consensus estimates of 1.27 million, according to FactSet.

Which stocks are in focus?
Oracle Corp. ORCL, +0.26% is up 1.6% after the software company reported an earnings beat late Monday.

Opinion: Oracle’s strong earnings thanks to hefty share repurchases

Shares of CBS Corp. CBS, -1.35% are up 0.3%, after the broadcaster announced Monday that former CEO Les Moonves won’t receive a $120 million severance package after the board of directors concluded he violated company policy and was uncooperative with an investigation into sexual misconduct allegations.

Boeing Co. BA, +3.80% stock is up 4.1%, after the company announced a 20% dividend increase and a new share buyback program Monday evening.

Shares of Tilray, Inc. TLRY, +16.56% are rising 7.8% Tuesday, after the cannabis company announced that it has reached a global supply and distribution agreement for medical marijuana with pharmaceutical giant Novartis AG NOVN, -1.31%

General Electric Co. GE, +1.82% stock is staging a rally Tuesday, with shares up 4.7% Tuesday. The stock has fallen more than 56% year-to-date.

Shares of Darden Restaurants, Inc. DRI, +5.00% are up 5.5%, after the Olive Garden parent company reported second-quarter same-store sales figures that beat Wall Street expectations.

How did the benchmarks trade yesterday?
On Monday, the Dow retreated 507.53 points, or 2.1%, at 23,592.98, the S&P 500 fell 54.01 points, or 2.1%, at 2,545.94, and the Nasdaq Composite Index retreated 156.93 points to 6,753.73, a drop of 2.3%.

The S&P 500 closed at its lowest level since October of 2017 on Monday, the Nasdaq finished at its lowest since November of 2017, and the Dow closed at lowest level since March 23, according to Dow Jones Market Data.

How are other markets trading?
Asian markets closed lower Tuesday, with Japan’s Nikkei NIK, -1.82% Hong Kong’s Hang Seng Index HSI, -1.05% and China’s Shanghai Composite Index SHCOMP, -0.82% losing ground.

In Europe, closed lower, with the Stoxx Europe 600 SXXP, -0.82% and the FTSE 100 UKX, -1.06% ending the day in the red.

Crude oil CLF9, -7.36% is continuing to slide Tuesday, down more than 5% on the day. The price of gold GCG9, +0.13% meanwhile, rose 0.1%, while the U.S. dollar DXY, -0.07% is down 0.1%

Providing critical information for the U.S. trading day.

https://www.marketwatch.com/story/us-stock-market-set-to-attempt-cautious-rebound-after-two-days-of-pummeling-2018-12-18