U.S. stocks fell to the lowest since April 2017 as the turmoil in Washington rattled financial markets anew, pushing the S&P 500 to the brink of a bear market. Crude sank below US$45 a barrel and the dollar tumbled.
The S&P 500 plunged almost 3 per cent to end at a 20-month low, in what was the worst final session before the Christmas holiday on record, according to data compiled by Bloomberg. It was the busiest Christmas Eve since 2010, with more than 1.7 billion shares changing hands in the truncated session.
“The more volatile things get the more volume surges,” Michael Antonelli, equity sales trader at Robert W. Baird, said in an email. “People don’t care it’s a session before Christmas when the U.S. equity market is acting like this.”
The S&P 500 notched a fourth straight drop of at least 1.5 per cent, a run of futility not seen since August 2015. It’s now down more than 19.8 per cent from its September record and on pace for the worst monthly drop since 2008. Trading was 41 per cent above the 30-day average in a session that’s normally subdued ahead of the Christmas holiday. The stock market closed at 1 p.m.
Investors looking to Washington for signs of stability that might bolster confidence instead got further rattled. President Donald Trump blasted the Federal Reserve, blaming the central bank for the three-month equity rout days after Bloomberg reported he inquired about firing the chairman.
Traders don’t need Mnuchin to tell them equities are in trouble after he spends the weekend quizzing bank CEOs on their liquidityU.S. government shutdown enters third day with no urgency to reopen after everyone leaves town
The comments came after Steven Mnuchin called a crisis meeting with financial regulators, who reportedly told the Treasury secretary that nothing was out of ordinary in the markets. Traders also assessed the threat to the economy from a government shutdown that looks set to persist into the new year.
“I don’t know that you can read too much into the markets reaction today but it’s signalling they’re not impressed,” said Chris Zaccarelli, chief investment officer at the Independent Advisor Alliance. “If we were up, I’d potentially say the message he was sending was well received but it seems like now they’re largely ignoring that message.”
The tumult in Washington over the weekend did little to placate U.S. equities that careened to the worst week in nearly a decade after the Federal Reserve signaled two more rate hikes in 2019. The S&P 500 on track for the steepest quarterly drop since the financial crisis. Combined with the ongoing trade war, higher borrowing costs and signs of a slowdown in global growth, the political turmoil has raised the specter of a recession.
“The reality is, in Washington you have this massive amount of unpredictability,” Chad Morganlander, portfolio manager at Washington Crossing Advisors, said on Bloomberg TV. That combines with concerns over global growth and removal of stimulus “gives investors this level of chill where they’re going to compress multiples regardless of what the backdrop in 2020 will be,” he said.
Elsewhere, emerging market currencies and shares fell even as China’s top policy makers said they’ll roll out more monetary and fiscal support in 2019, ratcheting up the targeted stimulus of 2018. Oil dropped even as some OPEC members pledged to deepen output cuts. The euro advanced against the dollar.
These are the main moves in markets:
The S&P 500 Index fell 2.7 per cent as of 1 p.m. New York time. The Nasdaq Composite Index dropped 2.4 per cent and the Dow Jones Industrial Average lost 653 points, or 2.9 per cent. The Stoxx Europe 600 Index dipped 0.4 per cent to the lowest in more than two years. The MSCI All-Country World Index declined 1.4 per cent. The MSCI Emerging Market Index decreased 0.5 per cent to the lowest in almost eight weeks.
The Bloomberg Dollar Spot Index dipped 0.5 per cent. The euro climbed 0.4 per cent to US$1.1419.The Japanese yen jumped 0.8 per cent to 110.40 per dollar, hitting the strongest in more than 15 weeks.
The yield on 10-year Treasuries fell three basis points to 2.76 per cent.The two-year rate lost four basis points to 2.6 per cent.
The Bloomberg Commodity Index decreased 1.2 per cent, the lowest in almost three years. West Texas Intermediate crude dipped 3.4 percent to US$44.05 a barrel, the lowest in almost three years. Gold futures gained 1.2 per cent to US$1,272.70 an ounce, the highest in six months.
–With assistance from Adam Haigh and Eddie van der Walt.