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 $45 a barrel and the dollar tumbled.
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 1pm.
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.
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 signaling 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 US 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: