Stocks Hit 20-Month Low as D.C. Turmoil Weighs: Markets Wrap

(Bloomberg) -- U.S. stocks fell to the lowest since April 2017 as the turmoil in Washington rattled financial markets anew, pushing the S&P 500 to the brink of a bear market. Crude sank below $45 a barrel and the dollar tumbled.

The S&P 500 notched a fourth straight drop of at least 1.5 percent, a run of futility not seen since August 2015. It’s now down more than 19.8 percent from its September record and on pace for the worst monthly drop since 2008. Trading was 41 percent above the 30-day average in a session that’s normally subdued ahead of the Christmas holiday. The stock market closed at 1 p.m.

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.

“Any kind of disciplined market-friendly messaging from the White House has gone out the window,” said Ernesto Ramos, head of equities at BMO Asset Management. “It’s all related to politics and the fact that the market’s figuring out there’s very little in the way of consistency and discipline.”

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.

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.

These are the main moves in markets:

Stocks

• The S&P 500 Index fell 2.7 percent as of 1 p.m. New York time.
• The Nasdaq Composite Index dropped 2.2 percent and the Dow Jones Industrial Average lost 653 points, or 2.9 percent.
• The Stoxx Europe 600 Index dipped 0.4 percent to the lowest in more than two years.
• The MSCI All-Country World Index declined 1.4 percent.
• The MSCI Emerging Market Index decreased 0.5 percent to the lowest in almost eight weeks.

Currencies

• The Bloomberg Dollar Spot Index dipped 0.4 percent.
• The euro climbed 0.4 percent to $1.1419.
• The Japanese yen jumped 0.8 percent to 110.40 per dollar, hitting the strongest in more than 15 weeks.

Bonds

• The yield on 10-year Treasuries fell five basis points to 2.74 percent.
• The two-year rate lost eight basis points to 2.56 percent.

Commodities

• The Bloomberg Commodity Index decreased 1.2 percent, the lowest in almost three years.
• West Texas Intermediate crude dipped 6.4 percent to $42.68 a barrel, the lowest in about three years.
• Gold futures gained 1.2 percent to $1,272.70 an ounce, the highest in six months.

--With assistance from Adam Haigh and Eddie van der Walt.

To contact the reporters on this story: Jeremy Herron in New York at jherron8@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, Dave Liedtka

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