Stocks Hit 19-Month Low as D.C. Turmoil Weighs: Markets Wrap

(Bloomberg) — U.S. stocks fell to the lowest since May 2017 as the turmoil in Washington kept investors on edge after the worst week for American equities in almost a decade. Crude sank below $45 a barrel and the dollar tumbled.

The S&P 500 slid for a fourth day, edging ever closer to a bear market after breaking below 2,400, while the Dow dropped more than 300 points. The Nasdaq Composite erased some of its earlier loss as Amazon Inc. pared a decline of as much as 5 percent. Trading in S&P 500 stocks was 40 percent above the 30-day average on a day that’s normally subdued ahead of the Christmas holiday.

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.

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 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.
U.S. stock markets close at 1 p.m. Monday in New York, ahead of the Christmas holiday, while Treasury trading ends at 2 p.m.

Read more how a vocal minority is echoing Trump’s concern about Fed tightening
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.

Stocks are in ‘shoot first, ask later’ mode, Wells Fargo’s Wren says.
These are the main moves in markets:
Stocks

• The S&P 500 Index fell 1.4 percent as of 11:10 a.m. New York time.
• The Nasdaq Composite Index dropped 0.6 percent and the Dow Jones Industrial Average lost 1.4 percent.
• The Stoxx Europe 600 Index dipped 0.5 percent to the lowest in more than two years.
• The MSCI All-Country World Index declined 0.9 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 $1.1423.
– The Japanese yen jumped 0.6 percent to 110.57 per dollar, hitting the strongest in more than 15 weeks.
– The British pound advanced 0.2 percent to $1.2674, the strongest in more than two weeks.
– The MSCI Emerging Markets Currency Index fell 0.1 percent to the lowest in a week.
Bonds
– The yield on 10-year Treasuries fell two basis points to 2.77 percent.
– Britain’s 10-year yield dipped six basis points to 1.263 percent, the lowest in more than a week.
Commodities
– The Bloomberg Commodity Index decreased 0.8 percent, the lowest in almost three years.
– West Texas Intermediate crude dipped 1.9 percent to $44.71 a barrel, the lowest in almost three years.
– Gold gained 0.9 percent to $1,269.70 an ounce, the highest in six months.

Bloomberg

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