The big fall
All three major indices fell. The S&P 500 fell 2.7 percent, the Dow 2.9 percent, and the Nasdaq lost 2.2 percent. These represented the largest Xmas Eve trading declines ever.
Stocks first fell after a statement on Sunday by Steven Mnuchin Treasury Secretary that he had checked on the health of largest banks in the US. However, the market had recovered by late morning only to go down again after Trump tweeted: “The only problem our economy has is the Fed. They don’t have a feel for the Market, they don’t understand necessary Trade Wars or Strong Dollars or even Democrat Shutdowns over Borders. The Fed is like a powerful golfer who can’t score because he has no touch – he can’t putt!” Investors were concerned that Trump might fire the Jerome Powell chair of the Federal Reserve.
Mnuchin’s announcement and reaction
Mnuchin released a statement saying that he had called the heads of the country’s biggest banks and the CEOs had assured him that their banks were healthy and had enough liquidity to lend to both consumers and businesses. He also claimed that markets were continuing to function properly.
According to a person who was familiar with the call, the CEOs were baffled by the session. The person said that the CEOs thought that it was an odd thing for Mnuchin to do especially on Sunday before markets opened. They were also astonished that he would make public his call. Many major banks such as JP Morgan Chase, Wells Fargo, Goldman Sachs and others all lost ground early Monday.
Jaret Seiberg, an analyst at Cowen and Co said: “This is the type of announcement that raises the question of whether Treasury sees problems that the rest of the market is missing. Not only did he consult with the biggest banks, but he is talking to all of the financial regulators on Christmas Eve. We do not see this type of announcement as constructive.”
This could be worst December for stocks since the Great Depression
Not only did the Dow Jones Index(DJI) suffer its worst week since 2008 but the Nasdaq is already in a bear market. After Monday, the DJI is down 18.8 percent from its September 20 high, or 5,036 points. The S&P 500 is also approaching a bear market as it is down 19.8 percent from a high on October 3.
Other concerns roil the market
The partial shutdown of the US government is also worrying investors. It could possibly continue into January and will be in force until at least this Thursday. Goldman Sachs economists write in a research note: “The confusion and disorder surrounding this week’s spending debate suggest fiscal deadlines in 2019 — including the debt limit deadline, which we expect to fall between August to October — could be more disruptive than they have been since the 2011-2013 period.”
Investors are also worried by a coming slowdown in economic growth. They are also concerned that the Feds may continue to raise interest rates next year. Finally, the trade war with China has not just created a bear market in China it could be contributing to the US stock downturn as well.
Techcrunch also reports on the downturn
Reflecting the fact it is Xmas eve, Techcrunch writes: “Twas the last trading day before Christmas, and on the trading floor,
Most stocks were falling, and then falling some more,
Treasury Secretary Steven Mnuchin all the banks had called,
In hopes that full coffers were still in their vaults.”
The article also suggests that doctors may advise traders to light up their joints, as the three main US indices are on track to experience their worst December since the 1930’s which most people alive will not remember.
