U.S. stocks hit 20-month low as D.C. tumult weighs

AFTER NEARLY A WEEK of collapsing stock prices, investors were cheered by a significant gain in U.S. equity markets partway through Wednesday trading. / BLOOMBERG NEWS FILE PHOTO/MICHAEL NAGLE
AFTER NEARLY A WEEK of collapsing stock prices, investors were cheered by a significant gain in U.S. equity markets partway through Wednesday trading. / BLOOMBERG NEWS FILE PHOTO/MICHAEL NAGLE

NEW YORK – U.S. stocks fell to the lowest since April 2017 as the turmoil in Washington rattled financial markets anew, pushing the Standard & Poor’s 500 index to the brink of a bear market. Crude oil sank below $45 a barrel and the dollar tumbled.

The S&P 500 notched a fourth consecutive drop of at least 1.5 percent, a run of futility not seen since August 2015. It now has fallen more than 19.8 percent from its September record and is on pace for the worst monthly drop since 2008. Trading was 41 percent 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.

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.

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“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 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 is 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:

Stocks

The S&P 500 Index fell 2.7 percent as of 1 p.m. New York time. The Nasdaq Composite Index dropped 2.4 percent and the Dow Jones Industrial Average lost 653 points, or 2.9 percent. The Stoxx Europe 600 Index dipped 0.4 percent to the lowest in more than two years. The MSCI All-Country World Index declined 1.4 percent. The MSCI Emerging Market Index decreased 0.5 percent to the lowest in almost eight weeks.

Currencies

The Bloomberg Dollar Spot Index dipped 0.5 percent. The euro climbed 0.4 percent to $1.1419. The Japanese yen jumped 0.8 percent to 110.40 per dollar, hitting the strongest level in more than 15 weeks.

Bonds

The yield on 10-year Treasuries fell three basis points to 2.76 percent. The two-year rate lost four basis points to 2.6 percent.

Commodities

The Bloomberg Commodity Index decreased 1.2 percent, the lowest in almost three years. West Texas Intermediate crude oil dipped 3.4 percent to $44.05 a barrel, the lowest in almost three years. Gold futures gained 1.2 percent to $1,272.70 an ounce, the highest in six months.

Vildana Hajric and Jeremy Herron are Bloomberg News staff writers.

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