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Stock markets finish off a third winning week in row

What's behind recent stock market volatility

Stock markets moved down a hair on Friday, but the S&P 500 nevertheless closed out its third straight winning week after a brutal December.

The U.S. market benchmark edged down by a fraction of one point, or less than 0.1 percent, to 2,596. On a typical day last month, the index had swings 10 times that. Friday was the first loss for the S&P 500 in six days, and much of the reason for it was the falling price of oil: Benchmark U.S. crude lost 1.9 percent to settle at $51.59 per barrel, and Brent crude, the international standard, sank 1.9 percent to $60.48 a barrel.

But big gains earlier in the week meant the S&P 500 still rose 2.5 percent over the last five days. The three-week winning streak for the S&P 500 is its longest since August.

"After some of the initial gains we saw earlier in the week I think it's just a rally looking tired," said Willie Delwiche, investment strategist at Baird. "I think it's probably not much more than a chance for people to digest the move and try to get a sense of whether we've had a bounce — and this is it — or maybe a pause as we continue to move higher."

What's in store for the economy in 2019?

The Dow Jones industrial index and the Nasdaq composite were flat for the day. The Dow rose 2.5 percent this week, to 23,995, while the Nasdaq gained 3 percent, to 6,971.

Investor hopes of a trade deal between the U.S. and China have risen during the two superpowers' negotiations this week, while comments from officials at the Federal Reserve suggested that the pace of interest rate increases could slow this year.

"Improved trade relations between the U.S. and China and progress towards a deal and away from tariffs is undoubtedly positive and reduces a major headwind," said Craig Erlam, senior market analyst at OANDA. "The same is true of the Fed and its shift to more flexibility on rate hikes."

Warning: Earnings season ahead

Companies across the country are gearing up to report how much profit they made in the last three months of 2018, as well as the entire year for many of them. Expectations are for a fifth straight quarter of earnings growth topping 10 percent.

General Motors gave an encouraging sign Friday when it offered better-than-expected profit forecasts for both 2018 and 2019. That helped the automaker surge to the biggest gain in the S&P 500, with GM shares jumping $2.45, or 7.1 percent, to $37.18.

But other big-name companies, like Apple and Samsung, have offered a more discouraging picture due to slowing growth in China and elsewhere. That's why analysts say this upcoming earnings reporting season, which kicks off in earnest next week, could be the next trigger for volatility in the market. 

Baird's Delwiche said he wants to hear how optimistic CEOs are given all the uncertainties about the economy. "We've seen some retrenchment in business confidence," Delwiche said. "Is it a blip or evidence that those animal spirits that we saw are starting to dissipate?"