Stocks Close at 14-Month Low in Broad Sell-Off: Markets Wrap

(Bloomberg) -- U.S. equity indexes slid to their lowest close in 14 months as investors weighed the impact of the Federal Reserve on growth in an economy already anxious over trade, geopolitical tensions and a possible government shutdown.

The S&P 500 Index finished Monday’s session at its lowest level since October 2017. The technology, health-care and consumer sectors led the rout, but no segment of the benchmark went unscathed. Insurance stocks plunged after a court ruling jeopardized Obamacare, while Johnson & Johnson sank on fresh worries its asbestos scandal will intensify.

At one point, the Dow Jones Industrial Average dropped more than 600 points. The Russell 2000 Index of smaller companies entered a bear market. The dollar dropped, while Treasuries gained. West Texas crude settled below $50 for the first time since October 2017 as glut fears grew.

Investors will be scrutinizing the Fed’s statement Wednesday, as well as Jerome Powell’s news conference, for clues as to its intentions for 2019. One market observer has already weighed in: President Donald Trump tweeted Monday that it was “incredible” the central bank was considering a rate hike, given low inflation and a strong dollar.

“The stock market, in particular, is very vulnerable to all of these speculations as to what’s going on, politically what’s going on outside our borders, who’s tweeting what, what the Fed’s going to do on Wednesday,” Terri Spath, chief investment officer at Sierra Mutual Funds, told Bloomberg TV.

Global growth forecasts for next year are being trimmed as a trade war between the biggest economies bites and markets reel from a volatile 2018. Meanwhile, political uncertainty still grips investors. There are yet more personnel changes within the Trump administration and confusion remains over Britain’s future relationship with the European Union.

U.S. Interior Secretary Ryan Zinke will leave at the end of the year amid a swirl of federal investigations. Investors will keep monitoring Brexit developments after Theresa May’s team pushed back against reports they are warming to a second referendum.

Retailers led declines in the Stoxx Europe 600 Index as Asos Plc plunged after warning that its Christmas shopping season got off to a disastrous start.

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Coming Up

• The Federal Reserve holds its final policy meeting of 2018 on Tuesday and Wednesday. The rate decision will be followed by a press conference with Chairman Jerome Powell.
• The Bank of Japan’s monetary policy decision is due Thursday, followed by a briefing from Governor Haruhiko Kuroda. A Bank of England decision is also Thursday.
• Chinese President Xi Jinping marks the 40th anniversary of Deng Xiaoping’s opening of the nation’s economy to the world with a keynote speech at a conference scheduled for Tuesday.
• A partial U.S. government shutdown could start this week if lawmakers and Trump fail to resolve how much money to allocate for Trump’s wall along the Mexican border.

And these are the main moves in markets:

Stocks

• The S&P 500 Index fell 2.1 percent as of 4 p.m. New York time.
• The Stoxx Europe 600 Index dropped 1.1 percent, the biggest fall in a week.
• The U.K.’s FTSE 100 Index fell 1.1 percent.

Currencies

• The Bloomberg Dollar Spot Index declined 0.3 percent.
• The euro rose 0.4 percent to $1.1346.
• The British pound jumped 0.3 percent to $1.2615.
• The Japanese yen increased 0.6 percent to 112.77 per dollar, the strongest in more than a week.

Bonds

• The yield on 10-year Treasuries dipped three basis points to 2.86 percent, the lowest in over a week.
• Germany’s 10-year yield gained less than one basis point to 0.26 percent.
• Britain’s 10-year yield rose three basis points to 1.266 percent.

Commodities

• The Bloomberg Commodity Index dipped 1.2 percent to the lowest in almost 18 months.
• West Texas intermediate crude declined 3.8 percent to $49.28 a barrel.
• Gold climbed 0.6 percent to $1,246.33 an ounce.

--With assistance from Susanne Barton, Masaki Kondo, Cormac Mullen, Adam Haigh and Eddie van der Walt.

To contact the reporters on this story: Sarah Ponczek in New York at sponczek2@bloomberg.net;Vildana Hajric in New York at vhajric1@bloomberg.net

To contact the editors responsible for this story: Jeremy Herron at jherron8@bloomberg.net, Andrew Dunn

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