By Trevor Hunnicutt
NEWYORK (Reuters) – Global investors gravitated toward safe-haven assets on Friday as worries about the world economy persisted, cutting short a two-day rebound in Wall Street stocks.
U.S. stock indexes seesawed, making it difficult to end one of the most brutal December selloffs in memory on a high note.
“Markets will likely remain treacherous in the New Year,” Marc Chandler, chief market strategist at Bannockburn Global Forex LLC, told clients.
After flirting with strong gains in the afternoon, the Dow Jones Industrial Average <.DJI> ended down 76.42 points, or 0.33 percent, to 23,062.4, the S&P 500 <.SPX> lost 3.09 points, or 0.12 percent, to 2,485.74 and the Nasdaq Composite <.IXIC> added 5.03 points, or 0.08 percent, to end at 6,584.52.
MSCI’s index of global equities <.MIWD00000PUS> gained 0.57 percent to bring the global benchmark to a weekly advance near 2 percent.
Markets swung wildly in a week shortened by the Christmas holiday, starting with Wall Street’s worst-ever Christmas Eve drop, pushing the S&P 500 to within a whisker of bear market territory.
But efforts at a late Santa Claus rally failed to salve investors after a year that brought gains for very few categories of financial assets, from stocks to bonds and commodities. The global MSCI index, the S&P 500, the Dow and the Nasdaq are each headed for their worst years since the 2008 financial crisis.
GRAPHIC – Global markets in 2018: https://tmsnrt.rs/2R8CUd7
The dollar index <.DXY> dipped 0.14 percent, with the euro <EUR=> up 0.14 percent to $1.1445 and Japanese yen <JPY=> strengthening 0.75 percent against the greenback at 110.17 per dollar. The greenback is down 1 percent this month against a basket of major currencies.
That has boosted gold, a traditional safe haven whose appeal this year was hit by a stronger dollar, which makes the yellow metal more expensive to buyers with other currencies. Gold <XAU=> is perched at six-month highs of $1,280.11 an ounce.
The steady drumbeat of disappointing economic data reinforced caution, including Japan’s slowing industrial output and retail sales, declining German inflation and U.S. data for November showing contracts to buy previously owned homes fell unexpectedly in the latest sign of housing market weakness.
Breaking with the bad news, the Chicago Purchasing Management Index came in ahead of consensus.
Chris Bailey, a strategist at brokerage Raymond James Financial Inc, said dollar weakness was good news for non-U.S. assets.
“If we get the transmission mechanism of a lower dollar, stocks outside the U.S. are set up for a good 2019,” Bailey said. “Once people get their heads around the fact the U.S. is not going to have yet another double-digit return year in 2019, you can look elsewhere.”
That would be a relief to world markets that largely underperformed the United States in 2018.
Bonds have also been helped in recent weeks by risk aversion. U.S. benchmark 10-year Treasury notes <US10YT=RR> last rose 8/32 in price to yield 2.7146 percent, compared with 2.743 percent late on Thursday.
Oil prices lifted a bit off two-year lows after a near 40 percent decline this quarter with U.S. West Texas Intermediate crude <CLc1> futures settling up 1.6 percent to $45.33 per barrel.
The Energy Information Administration reported U.S. crude stocks <USOILC=ECI> fell modestly last week.
(Additional reporting by Julien Ponthus, Sujata Rao, Saikat Chatterjee and Helen Reid in London; editing by Dan Grebler and G Crosse)