A steep sell-off in US stocks worsened in a pre-holiday shortened session on Monday, as a move by the US Treasury secretary to convene a crisis group and other political developments rattled investors and pushed the S&P 500 to the brink of a bear market.
All three major indexes ended down more than 2 percent on the day before the Christmas holiday. The S&P 500 ended down about 19.8 percent from its Sept. 20 closing high, just shy of the 20 percent threshold commonly used to define a bear market.
Treasury Secretary Steven Mnuchin called top U.S. bankers on Sunday amid the pullback in stocks. Investors also were grappling with a federal government shutdown and reports that Trump privately discussed the possibility of firing the Federal Reserve chairman.
“The headlines we are seeing today, yesterday, over the weekend are not great,” said Vinay Pande, global head of trading strategies at UBS Global Wealth Management.
“The market is concerned about what is happening in D.C. In the face of a large correction in the market, there seems to be disarray and disunity, and people aren’t speaking with one voice, which I think is discouraging to anybody in the market.”
The Dow Jones Industrial Average fell 653.17 points, or 2.91 percent, to 21,792.2, the S&P 500 lost 65.52 points, or 2.71 percent, to 2,351.1 and the Nasdaq Composite dropped 140.08 points, or 2.21 percent, to 6,192.92.
Last week, the S&P 500 suffered its biggest weekly percentage drop since August 2011, while the Dow had its biggest weekly drop since October 2008.
All 11 S&P 500 sectors ended in negative territory on Monday, meaning they were all in negative territory for the year.
Roughly three-fourths of the S&P 500 was trading in bear market territory.
All 30 components of the Dow industrials also finished in the red on Monday.
For the third straight day, more than 2,600 New York Stock Exchange- and Nasdaq-listed stocks were hitting 52-week lows, reflecting a depth of selling the market had not experienced since the height of the financial crisis a decade ago.
Mnuchin spoke on Sunday with the heads of the six largest US banks, who confirmed they have enough liquidity to continue lending and that “the markets continue to function properly.”
But investors said his move to convene a call on Monday with the President’s Working Group on Financial Markets, commonly as the “Plunge Protection team,” may have weighed on investors on Monday. “When the Dow is down 600 points, it’s hard to say it was a positive,” said J.J. Kinahan, chief market strategist at TD Ameritrade in Chicago.
“Although his intention was a very good one, the net feeling I think was, ‘Is there a bigger problem that we don’t know about?” he said. Aside from Mnuchin’s move, Trump’s budget director and chief of staff, Mick Mulvaney, on Sunday said a partial U.S. government shutdown could continue to Jan. 3, when the new Congress convenes and Democrats take over the House of Representatives.
The stock market closed at 1 p.m. EST (1800 GMT) ahead of Tuesday’s Christmas holiday.
Give the extremely restricted liquidity at this time of year, Pande said, “any selling here will beget a very large decline.”
About 5.9 billion shares changed hands in US exchanges, compared with the 8.9 billion-share daily average over the last 20 sessions.
Declining issues outnumbered advancing ones on the NYSE by a 3.56-to-1 ratio; on Nasdaq, a 2.68-to-1 ratio favored decliners.The S&P 500 posted no new 52-week highs and 242 new lows; the Nasdaq Composite recorded five new highs and 837 new lows.