Back on January 25th the Dow Jones Index(DJI) passed through an all-time record high surpassing 20,000. It has remained above that level until this Monday when it closed down 122.65 points and was at 19,971.12. The NASDAQ dropped 47.07 points and the S&P 13.79 points. The Toronto Canada TSX/S&P also suffered a severe drop of 170 points.
The Guardian speaks of financial markets suffering from uncertainty and the jitters as it noted the DJI falling below the 20,000 level. In Canada, the Bloomberg Nanos Canada Confidence Index fell to 56.1 in the period ended January 27 coinciding with Trump’s first week in office. This is the lowest level since early December. There is pessimism about the economic outlook and personal finances. Trump has pledged to renegotiate the North American Free Trade Act (NAFTA).
Asian stock markets also fell as global fears appear to be growing about the unpredictability of U.S. policies. Friday’s executive order by Trump included a 120-day hold on allowing refugees into the country, an indefinite ban on Syrian refugees, and a 90-day ban on citizens from Iran, Iraq, Libya, Somalia, Sudan, Syria and Yemen. The action brought huge protests to many US cities with international airports. Critics claim Trump’s action violates both U.S. law and the Constitution.
David Korok, chair and chief investment officer of Cumberland Advisors said: “First the market has gone up strongly since the (presidential) election. So it is ripe for a correction and is extended in valuation metrics. For these current market prices to be justified, the Trump agenda must unfold perfectly. But the reverse is under way and fragmented policy combined with obfuscation is now a growing detriment to growth acceleration.”
Several countries named in the ban including Iraq have criticized it. Iran has imposed a retaliatory ban on Americans. Although U.S. judges in at least five states blocked federal authorities from enforcing the order, some lawyers said that in some cases authorities were not following the rulings.
Other factors weighing on the market included slower economic growth than expected in the fourth quarter. GDP rose by just 1.9 percent annually rather than the 2.2 percent expected by economists, and far below the 3.5 percent rate in the third quarter. Disappointing earnings at Chevron and Starbucks also may have weighed on markets. On Thursday U.S. manufacturing data will come out and the Federal Reserve will meet on Thursday.
U.S. crude prices dropped 0.3 percent adding to a 1.1 percent slide Friday as growing US output threatens to create a greater surplus in spite of production cuts by OPEC. Gold profited by the growing unease and added 0.3 percent. Spot gold was $1,193.10 an ounce.
