Wall Street markets finished deep in red on Thursday for the second day after the Federal Reserve raised its benchmark interest rate. The fears of blocking the operations of the federal government have also pushed key US indices to a new bottom.
The blue-chip index Dow Jones Industrial Average wiped out 464 points of its value and finished at 22,859.60 points. In two days, the index lost more than 800 points and its five-day losses exceeded 1,700 points.
The broader S&P 500 fell by 1.58% to 2,467.42 points.
The technology index Nasdaq Composite dropped by 1.63% to 6,528.41 points and hit the bear market amid the serious losses of Amazon and Apple. The companies in the S&P 500 have lost a total of 2.39 trillion USD from their market capitalization this month. The Cboe Volatility Index, one of the best indicators of market fears, exceeded 30 points.
The US markets reached their lowest point for the day after the Speaker of the United States House of Representatives, Paul Ryan, announced that President Donald Trump would not sign a budget compromise. This happened just one day after the Federal Reserve decided to raise its benchmark interest rate. The blue-chip index Dow Jones wiped out more than 350 points from its value after the decision, and the main indexes reached a new bottom for the year.
On Wednesday, the US Senate approved a budget to allow a number of federal offices to work until February 8, excluding the 5-billion-dollar costs for building the wall across the US-Mexican border. Paul Ryan said that Trump will not sign the draft budget bill if it does not provide funds for the wall.
The investors’ sentiment on Thursday were also affected by the fact that Trump’s administration and dozens of international allies have condemned China for their long-term efforts to steal trade secrets from other countries. The US and China are involved in a trade dispute, with the two countries imposing billions of dollars of tariffs on imported goods.
In the bond markets, the yields on two-year US government bonds that are most sensitive to Fed policy expectations rose by four basis points to 2.6706% and yields on 10-year bonds rose two basis points to 2.7944%.
In the commodity markets, the oil prices reached their lowest level in over one year because of fears of oversupply after stock markets declined against the backdrop of rising interest rates by the Fed.
The US light crude WTI finished the session with a drop of 2.29 USD to 45.88 USD per barrel, which is its lowest price since July 2017. The WTI has lost about 24% of its value this year.
Brent oil decreased by 2.89 USD and reached a level of 54.35 USD per barrel, which is its lowest price since mid-September 2017. Brent lost nearly 19% of its value in 2018.
The US futures on gold rose by 11.50 USD to 1,267.90 USD per ounce.
New change in Trump’s government
The United States Secretary of Defense, James N. Mattis, will leave the government at the end of February and retire. Donald Trump said that he would soon announce his successor.
“General Jim Mattis will be retiring, with distinction, at the end of February, after having served my Administration as Secretary of Defense for the past two years. During Jim’s tenure, tremendous progress has been made, especially with respect to the purchase of new fighting equipment. General Mattis was a great help to me in getting allies and other countries to pay their share of military obligations. A new Secretary of Defense will be named shortly. I greatly thank Jim for his service!”, wrote Donald Trump on Twitter.
James Mattis himself mentions as a reason for his retirement disagreements about different actions. This is clear from the letter to Trump. The US president has the right to nominate a defence minister with closer views with him.
A day earlier, Trump announced that he would withdraw US troops from Syria. This move was also criticized in the ranks of his party, as well as by his close associates.