Wall Street markets ended the pre-Christmas session on Monday deep into the red territory.
The blue-chip index Dow Jones Industrial Average fell by more than 650 points (2.9%), falling below the threshold of 22,000 points. The index sank over 2%, then recover almost all the losses of the day before it sinks again.
The broader S&P 500 wiped out over 2.7%, reaching a level of 2,351.10 points, which officially measures the Bearish territory, dropping 20.06% compared to its last growth. All 11 sectors of the index are in negative territory for December, the fourth quarter and the whole year
The technology index Nasdaq Composite declined by more than 2.2%, reaching a level of 6,162.92 points.
The markets responded to the turmoil coming from Washington. Earlier last week, media reports said that US President Donald Trump is considering sacking Federal Reserve Governor Jerome Powell. At the same time, Defense Secretary James Matisse announced he is resigning because of the head of state’s decision to withdraw the US army from Syria.
Earlier today, Trump resumed his attack on the Fed, saying the central bank was the “only problem” of the US economy.
Last week Dow Jones lost 1,655 points or nearly 7%. This was also the worst week for the index since the October 2008. The S&P 500 also wiped out 7%.
Traditionally, after a 20% or more decrease of the largest growth, the index is believed that it entered in a bearish market. Nasdaq reported a 22% drop from its August high and was officially in the bearish territory.
On Sunday, the US Finance Minister Steven Mnuchin telephoned the heads of the six largest US banks in an effort to reassure troubled investors that the financial markets and the economy are functioning seamlessly.
According to analysts the Steven Mnuchin’s phone calls “raise more questions than answers”. In their words, it is unclear what the real purpose of the talks was, as no one seems to have any concerns about the issues that Mnuchin wanted to calm the markets.
Meanwhile, media reports hinted that the US President Donald Trump has been discussing the possibility of removing Federal Reserve Governor Jerome Powell, but earlier this week, Steven Mnuchin has denied these allegations.
Last week, the Fed raised its key interest rate for the fourth time since the beginning of the year, and Jerome Powell hinted that the central bank would keep its policy in the coming year
December is traditionally a more volatile month for stocks. Over the past month, however, the Dow Jones and the S&P 500 wiped out more than 12%, and are about to mark their worst performance for the month since the Great Depression in 1931.
The yields on US Treasury sank with returns on 10-year bond yields declined to 2.783% and 30-years bonds to 3.023%.
According to a poll, the US Treasury yield curve will invert next year, possibly within the next six months, much earlier than a forecast just three months ago, with a recession to follow as soon as a year after that.
The crude oil has also fallen. The US light crude WTI wiped more than 4.8% of its value, reaching a price of 43.37 USD per barrel. The futures on the international Brent oil depreciated by 4.91% to a price of 51.18 USD per barrel.
Gold, in turn, rose by 1.16% to 1,272.70 USD per ounce.