WASHINGTON – Efforts by US President Donald Trump’s administration to stem a market sell-off have so far failed, with the S&P 500 inching ever closer to bear market territory on Christmas Eve, having dropped far off its 52-week peaks.
In a move that shocked market watchers, US Treasury Secretary Steven Mnuchin on Sunday individually phoned the chiefs of the country’s six largest banks, apparently to reassure them about liquidity, even as there was no known concern on the issue.
This followed reports over the weekend that Trump wanted to sack the head of the Federal Reserve, forcing Mnuchin to issue an unexpected statement in which he insisted the president does not believe he has the right to fire Jerome Powell.
The federal government meanwhile is in the midst of a partial shutdown sparked by Trump’s demand for funding for a border wall with Mexico, which officials say will not be resolved quickly. There has been no sign of progress in talks with opposition Democrats about the funding bill.
Adding to the turbulence in Washington, Defence Secretary Jim Mattis had a falling out with Trump over the president’s sudden decision to withdraw from Syria and the retired Marine general is due to be gone by New Year’s Day.
A number of other high-level cabinet and executive office posts also need to be filled.
Stocks extended their losses in the final hours of trading before Christmas, but despite the turmoil, the president stuck to his guns.
“The only problem our economy has is the Fed. They don’t have a feel for the Market, they don’t understand necessary Trade Wars or Strong Dollars or even Democrat Shutdowns over Borders,” Trump said on Twitter.
“The Fed is like a powerful golfer who can’t score because he has no touch – he can’t putt!” he added.
The president is long opposed to the Fed raising interest rates, though the bank says it is responding to economic conditions. Notably, unemployment in the US is near all-time lows.
The Dow Jones Industrial Average was down more than 600 points, losing nearly 3 per cent on the day. The S&P 500 was lower by about 2.5 per cent, while the tech-heavy Nasdaq Composite gave up more than 5 per cent.
The losses mean the stock market is close to being considered a “bear market,” generally taken to mean a downturn of 20 per cent or more from a previous high.
There is only half a day of trading on Monday and markets will be closed on Tuesday for the holiday.