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What does it mean when stocks enter a 'bear market'

23 December, 2018, 06:30 | Author: Lawrence Cooper
  • US stocks sink after Fed rate hike, Dow swings over 700 points to close down 1.5%

The revived possibility of a shutdown worsened the downbeat mood on markets after the Federal Reserve announced another interest rate hike on Wednesday and made only subtle adjustments to the course of monetary policy tightening next year despite rising worries about global growth and a big pullback in the stock market.

The S&P 500 was down 2.1 per cent for the day while the Dow Jones industrial average fell 414.23 points to 22,445.37.

The benchmark S&P 500 index has slumped 10.6 percent this month and is nearly 16 percent below the peak it reached in late September.

However, selling set in by afternoon with some of the major technology firms - that led the market's rally earlier this year - experiencing some of the most bruising falls.

The increasing likelihood of a partial government shutdown injected further pessimism into USA stock markets.

The technology-heavy Nasdaq is now down nearly 20 percent from the peak it reached in August.

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The possibility of a government shutdown fed investor anxieties that contributed to another down day on Friday for U.S. stocks. Jeff Flake, Republican Senator from Arizona, commented: "There is no path forward for the House bill".

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Then the political gridlock in Washington put the market in a downward spiral, as President Donald Trump held fast on his demands for more border security funding and Democrats resisted, and the government moved closer to a shutdown.

After years of gains, USA investors are fleeing stocks, anxious about a range of factors likely to hit corporate profits, including slowing economic growth domestically and overseas. "Fear about a USA government shutdown is playing into the mix too".

"This is the classic shoot-first-and-ask-questions-later market", said Scott Wren, senior global equity strategist at Wells Fargo Investment Institute. The Dow fell 464.06 points, or 2 percent, to 22,859.60 after sinking as much as 679. The Dow is off 10 percent for December, and the Nasdaq is down more than 19 percent since August 29.

Stocks sank almost 500 points Thursday on the news that President Donald Trump would not sign the spending bill that would avert a partial government shutdown Friday night.

By contrast, in that same period, the S&P 500 .SPX gained just 331 percent, with a total return of 425 percent. Oil prices fell sharply again. The Russell 2000 index of smaller-company stocks lost 33.92 points, or 2.6 percent, 1,292.09. Target also climbed 1 percent. Indexes in Italy, Portugal and Spain took bigger losses.

As investors adjusted to the prospect of a weaker economy and lower long-term interest rates, the dollar fell to ¥110.90 from ¥112.36. The yield on the 2-year Treasury note fell to 2.62 percent from 2.65 percent. Wholesale gasoline lost 4.6 percent to $1.32 a gallon and heating oil slid 3.1 percent to $1.75 a gallon. The euro fell back to $1.1369 from $1.1469 and the British pound slipped to $1.2639 from $1.2671.

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