On Monday, the S&P 500 (^GSPC) fell 2.71%, or 65.52 points, and cracked below 2,400. Now at 2,351.1 points, the S&P 500 is at its lowest level since April 2017. The index fell into a bear market territory at the close, down more than 20% from its September intraday high of 2940.91 points
The Dow (^DJI) slid 2.91%, or 653.17 points, as of market close Monday. The Nasdaq (^IXIC) declined 2.21%, or 140.08 points, having closed in bear market territory on Friday.
Crude oil prices also continued their downward spiral on Monday. Prices for U.S. crude oil fell 6.7% to settle at $42.53 per barrel, the lowest settlement price since June 2017, as investors broadly fled from riskier assets.
Monday was a shortened trading day for investors. U.S. equity markets closed at 1 p.m. ET in observance of Christmas Eve.
On Sunday, Treasury Secretary Steven Mnuchin held individual calls with CEOs of six of the largest banks in the U.S. and discussed liquidity concerns. Mnuchin said in a statement that “the banks all confirmed ample liquidity is available for lending to consumers and business markets.” The discussions come amid an escalating stock market sell-off as well as ongoing tension between President Donald Trump and Federal Reserve Jerome Powell over rising interest rates.
The Treasury Secretary also said he would convene a call on Monday with the president’s Working Group on Financial Markets, a group sometimes known as the “Plunge Protection Team” that also convened in 2009 in the late stage of the financial crisis. The group includes Federal Reserve as well as Securities and Exchange commission officials.
Mnuchin also said in separate Twitter posts that Trump never suggested firing Powell, attempting to quell concerns after reports late last week stated that the president had discussed firing the Fed chairman over the central bank’s recent moves to tighten monetary policy. Markets have responded to the Fed’s latest rate hike decisions with increased volatility, which could potentially threaten Trump’s reelection prospects.
Meanwhile, a fresh government shutdown began over the weekend after Congress failed to pass a measure to fund several government agencies that have not yet received appropriations. The affected agencies include the Treasury, Agriculture, Homeland Security, Interior, State, Housing and Urban Development, Transportation, Commerce and Justice departments. Although the Treasury is one of the agencies subject to the partial shutdown, treasury auctions, payments of principal and coupons and other payments including social security should all continue as usual, since those operations are characterized as “essential.”
Traders work on the floor at the closing bell of the Dow Industrial Average at the New York Stock Exchange on December 19, 2018 in New York. (Photo by Bryan R. Smith / AFP) (Photo credit should read BRYAN R. SMITH/AFP/Getty Images)
While the shutdown adds uncertainty to an already overwrought market, it will not itself prevent a March Fed rate hike, Andrew Hollenhorst, an analyst with Citi, wrote in a note. But if the shutdown persists, “it might become a marginal reason for the Fed to be more cautious,” he added.
Hollenhorst also noted that the shutdown will create a “limited drag on growth” in the economy, even as about an estimated 380,000 workers are furloughed and another 420,000 continue working with delayed payments.
The Trump administration warned on Sunday that the partial government shutdown could continue into January when the new Congress takes control, Mick Mulvaney, director of the Office of Management and Budget, said on Fox.
ECONOMY: Chicago Fed national activity index rose in November
The Chicago Federal Reserve’s barometer for U.S. activity increased November, with the reading coming in at 0.22. October’s reading was revised to a neutral 0.0. Consensus expectations were for a reading of +0.2 in November, according to Bloomberg data. A positive reading for the index, which accounts for 85 indicators of growth in national economic activity, points to an economy expanding faster than the historical average. Contributions from indicators relating to production, sales, orders and inventories rose in November after decreasing in October, the Chicago Fed said in a statement.
STOCKS: Tesla cuts Model 3 vehicle prices in China
Tesla (TSLA) cut its prices on some of its Model 3 electric cars in China. Prices of certain Model 3 vehicles were cut by as much as 7.6%, with the starting price for a Model 3 in China now the equivalent of $72,000. This marks the third price cut for Tesla vehicles in China in the past two months, and comes after the vehicle maker said it was “absorbing a significant part of the tariff” from the U.S.-China trade war to keep prices affordable for overseas consumers. Shares of Tesla tumbled along with the broader market, falling 7.62% to $295.39 each as of market close.
A number of Chinese companies are urging employees to boycott Apple (AAPL) products after the arrest of Huawei Technologies CFO Meng Wanzhou, who was arrested earlier this month in Vancouver by Canadian authorities at the request of the U.S. Many Chinese businesses told employees they will get subsidies for purchasing Huawei smartphones, according to a report from the Nikkei Asian Review. Others are boycotting Apple, which competes with Huawei as a smartphone producer. Shares of Apple fell 2.59% to $146.83 each as of market close.
Snap (SNAP) CEO Evan Spiegel reportedly ignored warnings of the company’s redesign of the Snapchat app after visiting China in 2017 and deciding that his messaging app needed an overhaul based on trends he saw there, according to the Wall Street Journal. Snap lost users for the first time in its history after the redesign debuted in February, and its stock has fallen about 76% since then. Spiegel also dismissed Facebook CEO’s Mark Zuckerberg’s interest in purchasing Snap in 2016 and did not report Zuckerberg’s advances to the entire board, the WSJ reported. Shares of Snapchat bucked the trend of the broader market and rose 4.21% to $5.20 each as of market close, bouncing back after hitting an all-time closing low of $4.99 per share on Friday.
