New York: US stocks tumbled to their lowest since May 2017 as the turmoil in Washington kept investors on edge after the worst week for American equities in almost a decade. The dollar also fell.
The S&P 500 slid for a fourth straight day, edging ever closer to a bear market after breaking below 2,400, while the Dow Jones Industrial slid 300 points and the Nasdaq Composite slipped deeper into a bear market.
“Blame on it on panic selling, emotion, algos, whatever — when negative momentum takes over, very little can stop it,” Frank Cappelleri, senior equity trader and market technician at Instinet, said. “Support is meaningless right now. Once we see a material lift, a downside reference point will be clear.”
Investors looking to Washington for signs of stability that might bolster confidence instead got further rattled by news that Secretary Steven Mnuchin called a crisis meeting with financial regulators. Traders also assessed the threat to the economy from a government shutdown that looks set to persist into the new year.
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 signalled two more rate hikes in 2019. The S&P 500 is down 19 per cent from its record and 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 spectre of a recession.
“The reality is, in Washington you have this massive amount of unpredictability,” Chad Morganlander, portfolio manager at Washington Crossing Advisors, said. 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.