Nasdaq drop leaves it just shy of bear market

Share

The benchmark index was down 9.2% since Powell became Fed chairman on February 5.

The Stoxx Europe 600 Index increased 0.3 per cent.

Opening losses for the heavyweight mining and financial sectors weighed on the market, while energy and healthcare stocks were also down early. Mortgage costs, which are pegged to longer-term rates, may not move higher, but CD rates will. Britain's FTSE 100 rose 1 percent while Germany's DAX added 0.2 percent and the CAC 40 in France rose 0.5 percent.

Kelly said the recent market slide could present an entry point, especially for investors who previously felt stocks were too expensive.

NAB, which was handed a mammoth 88.4 per cent first strike on Wednesday, fell 0.69 per cent to $23.16, with Westpac falling 0.9 per cent to $24.11, and Commonwealth Bank dropping 0.59 per cent to $68.99. This, and what's likely to play out over the next few weeks, illustrates a bigger phenomenon: the threat that the Fed and other central banks are increasingly in a no-win situation, due to factors mostly outside their control. Barring huge gains, this will be the worst December for the USA market since the 1930s.

"We expect additional rate hikes will invert the three-months to 10-year yield curve, which is a reliable signal for a bear market for stocks and a coming recession for both the USA and the rest of the world", said Jeffrey Kleintop, chief investment strategist at Charles Schwab in Boston.

us stocks slipped on Thursday, continuing their declines from a day earlier, as a batch of disappointing earnings reports added to the gloom after the Federal Reserve quashed hopes of a toned-down approach to its interest-rate hike trajectory.

The dollar was down for the day and recovered slightly after the Fed's move.

As Mr Powell has said, the Fed is now feeling its way forward and will act in line with how the economy performs.

More news: Government to meet fiscal deficit target of 3.3%: Jaitley

The sharp decline in the United States stock market following the Fed announcement adds to the sense that market expectations are now discounting a weaker macro trend.

The technology-heavy Nasdaq composite did even worse, and is now down 20 percent from its record high in August having closed Thursday with a 108-point loss. Bond prices rallied and the dollar, weaker on the day before the decision, regained some ground against most major currencies.

In other words, he tried to tell the world, the Fed would be flexible as it tries to keep the economy humming without risking a surge in inflation.

By diminishing its bond market holdings each month, the Fed puts further upward pressure on interest rates, something Trump explicitly requested them this week to stop. Not only did the Fed drop the number of expected rate increases in 2019, it published forecasts on Wednesday suggesting that only one additional step higher would be necessary to bring rates to a "neutral" level where they neither stoked growth or hindered it.

The S&P 500 Index dropped 1.5 per cent after policy makers raised rates for the fourth time this year and lowered their forecast for hikes next year to two from three.

When taken together, the latest quarter-point move, language changes and shift in rate projections indicate continued confidence in the economy, yet also greater caution over how far and fast the Fed expects to move with future hikes.

Asked if Trump's calls on the Fed not to raise rates further may affect the course of monetary policy, Powell said, "I'm not anxious", and that the central bank will continue to make "the best decisions" based on "the best thinking" and "diverse perspectives" from the business and financial circles, as well as various other parts of the country.

However, there are fears that conditions could turn tougher next year as the fiscal boost from Mr Trump's spending and tax cut package fades and the global economy slows.

Share