What happened

Cummins (CMI 0.61%) stock tumbled 11.5% in December, according to data from S&P Global Market Intelligence, ending 2018 down nearly 24%. That's not exactly what you expect to see from an engine manufacturer in an exceptionally strong year for the trucking markets. Yet the broader sell-off in industrial stocks in particular and one bit of news from the trucking markets in December were enough to dampen investors' spirits.

Cummins, however, has kicked off 2019 on a positive note, with the stock gaining around 3% in the first few trading days of the year.

Check out the latest Cummins earnings call transcript.

So what

Concerns about a trade war have hit industrial stocks across the board in recent months. Cummins CEO Tom Linebarger has been vocal about how retaliatory tariffs can put at risk the profitability and growth of industrial manufacturers like Cummins that have significant operations outside the United States. Cummins expects to incur $80 million in tariff-related costs in fiscal 2018 and nearly $150 million in fiscal 2019.

Post-it Notes with question marks drawn on them.

Image source: Getty Images.

Thanks to the impact of tariffs, Cummins left its fiscal 2018 guidance unchanged despite delivering record numbers for its third quarter, triggering investor concerns about growth. It didn't help much, either, when the much-awaited G-20 summit meeting between the U.S. and China on Dec. 1 failed to allay the market's fears. While the nations showed signs of a truce, there was no clarity about how and when.

For Cummins, China is an important growth market -- its sales from the nation jumped nearly 40% to $4.9 billion in 2017. That growth's stalled, what with the company projecting flat sales from China in fiscal 2018.

To add fuel to the fire, ACT Research revealed that orders for key heavy-duty segment Class 8 trucks in North America slumped 17% year over year in November, marking the first such negative year-over-year month in nearly two years. Whether the trucking cycle has peaked is on every investor's mind now.

The preliminary order numbers coming in for December aren't great, either, but industry experts don't see anything unusual here, which is perhaps why Cummins shares are showing some signs of life this month.

Now what

Preliminary North American Class 8 truck orders may have slipped 24% sequentially in December, but ACT Research believes the phenomenal jump in orders through 2018 and the huge backlog already lined up for truck manufacturers for 2019 means new order flow was bound to cool off at some point in time. In other words, trucking sales should still remain strong in the coming months, signaling another strong year ahead for Cummins.

For now, Cummins is on track to report record sales, earnings per share, and operating cash flows for fiscal 2018 in early February. The stock's drop in December, therefore, had more to do with macro concerns, which also means it could bounce back just as quickly on any good news from China in particular. Keep an eye open.