Economic News

Stock Market Losses Deepen on Christmas Eve, S&P Falls Into Bear Market

It has not been a good month for the stock market. In fact, as CNN Business reports, last week marked the worst week of trading since 2008 and the markets look to be on their way to the worst December since the Great Depression (yes, “Depression” — not “Recession”). Meanwhile the Dow Jones Industrial Average fell below 22,000 in an abbreviated trading day after looking to be on its way to 27,000 less than 100 days ago.

As usual there are several different reasons that markets are panicking. For one, investors didn’t seem to react well to last week’s announcement that the Federal Reserve would once again be raising interest rates despite the fact that the development was practically a foregone conclusion. What wasn’t expected was a statement from Treasury Secretary Steven Mnuchin on Sunday. Following reports that President Trump was considering ousting Federal Reserve Chairman Jerome Powell, Mnuchin aimed to calm the market by announcing he’d spoken with top bank executive who confirmed they had “ample liquidity” for lending. In his statement Mnuchin said, “We continue to see strong economic growth in the U.S. economy with robust activity from consumers and business,” also noting that “markets continue to function properly.” Unfortunately his attempt at reassuring the market seems to have backfired as the Dow was down more than 600 points for the day when it closed.

Also of note is the current partial government shutdown that’s occurred after Congress and the President failed to reach a new budget deal. Mnuchin also briefly addressed this in his statement, stating, “With the government shutdown, Treasury will have critical employees to maintain its core operations at Fiscal Services, IRS, and other critical functions within the department.” Still it seems the worries investors have about the shutdown have more to do with politics — especially since a divided Congress will be sworn in next month with the Democrats leading the House of Representatives. This prospect once seemed to delight the markets, but the inability for a united government to pass a budget might have some investors worrying about the future.

While market volatility has become the norm these days, things are quickly turning from correction to bear territory. Currently the Dow is off some 18% from its previous high set in September, leaving it just two points from that bear-level threshold. Things are even worse for the S&P 500 as it officially closed in bear market territory today as it was down 20.06% from recent highs. The NASDAQ has also gone bear, having lost more than 22% since setting a high in August.

Up until now there had been some hope of a “Santa Claus Rally.” On the contrary, today now officially marks the worst Christmas Eve trading session in history. Technically there is still a little bit of time for the bears to hit the brakes and put the bulls back in the driver’s seat before that 20% threshold is reached.  As we’ve seen a lot can happen in just a few short days, making for a very interesting end to 2018 on the markets.

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