Investors Nervous With Fed Meeting Ahead and a Santa Crash Behind

Ann Santiago
December 21, 2018

The Dow Jones Industrial Average fell 507.53 points to 23,592.98, and the Nasdaq fell 2.2% to close at 6,753.73.

Contracts on the S&P 500 Index expiring in March climbed as much as 0.7 percent after the equity gauge closed little changed on Tuesday.

The Nasdaq composite rose 30.18 points, or 0.4 percent, to 6,783.91.

On Monday, U.S. President Donald Trump and his top trade adviser stepped up their criticism of the central bank's monetary tightening, raising investor anxiety.

After two straight routs, U.S. stocks had opened solidly higher and pushed upward through the early afternoon.

In addition, the German Ifo economic institute's business climate index fell for the fourth month in a row to its lowest level in more than two years and Japan's government revised down its economic growth forecasts.

The pullback seen yesterday afternoon pulled the Dow down to its lowest closing level in over eight months, while the Nasdaq and the S&P 500 dropped to their lowest closing levels in over a year.

The Dow is down 424.87 points, or 1.8 percent.

"That is basically retail investors panicking", said Mark Hackett, chief of investment research at Nationwide Investment Management.

A measure of small-company stocks fell into a bear market, a decline of 20 percent below their recent peak. The Russell 2000 index dipped 32.97 points, or 2.3 percent, to 1,378.14. "He precipitated this sell-off in early October when he said we were a long way from the "neutral" federal funds rate".

Stocks plummeted once again on Monday, driven largely by fears the Federal Reserve is planning to raise interest rates later this week. The Shanghai Composite index shed 1.1 percent to 2,549.56. Higher rates can slow economic growth and the USA economy is expected to cool off in 2019.

Bond prices rose. The yield on the 10-year Treasury note fell to 2.86 percent from 2.89 percent.

FED DECISION: The Fed is widely expected to raise its short-term interest rate after a meeting ends Wednesday.

ITALY: There was also some relief, particularly in Europe, that Italy had reached an agreement with the European Commission on its budget plans, which the EU's executive arm had warned could break the euro's rules and lead to legal action.

The two-day Fed meeting, starting today, has been expected to deliver another interest-rate increase, Reuters reported.

Shares of Facebook Inc, Apple Inc, Inc, Netflix Inc and Google parent Alphabet Inc, collectively known as FAANG, gained between 1.3 percent and 3.1 percent.

CURRENCIES: The dollar weakened to 112.39 yen from 112.52 yen in late trading Tuesday.

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