Published: Sun, December 23, 2018
Money | By Arnold Ball

United States stocks suffer worst week in a decade

United States stocks suffer worst week in a decade

USA stocks rebounded briefly after comments by a Federal Reserve official eased investor worries that the central bank was locked into raising rates in 2019.

Wall Street fell in volatile trading on Friday, after a few failed attempts at a rally, led by a drop in technology and other high-growth sectors, while defensive stocks rose amid concerns of slowing growth and a looming government shutdown.

The signature market turbulence of the past several weeks resumed Friday (US time) as stocks bobbed up and down before sliding deep into losses by the end of trading.

The Russell 2000 gave up 118.73 points, or 8.4 percent.

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.

"We would use all available tools" if the economy got significantly worse, Williams said, though he didn't predict the economy would turn south and pledged the Fed would "take the right policy decision to keep this economy strong".

Wren said investors felt Fed Chairman Jerome Powell came off as unconcerned about the state of the USA economy and fears that the economy could not just slow down, as expected, but go into a recession in 2019 or 2020.

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"The bond market has been telling us something for about a year, and that is there's not going to be much inflation and there's not going to be a sustained surge in economic growth", said Wren, of Wells Fargo.

With December 21's losses, the Nasdaq has fallen almost 22 percent from its August 29 high. The S&P 500 is now down 7.7 per cent for the year and the Nasdaq is on the verge of a "bear market", which is a drop of 20 per cent from its peak this year. The yield on the 10-year Treasury finished today nearly a half percent lower than its recent October peak.

The possibility of a partial shutdown of the federal government at midnight Friday also loomed over the market. That's how it works, remember: When bond prices rise, yields fall.

The S&P 500, already on pace for its worst December since the Great Depression, hit its lowest since August 2017. Those worries are reinforced by a 30 per cent-plus decline in world oil prices since October.

The Russell 2000 index of smaller-company stocks shed 33.92 points, or 2.6 per cent, 1,292.09. Target also climbed 1 percent. The yield on the 2-year Treasury note fell to 2.62 percent from 2.65 percent. The tech-heavy Nasdaq composite slipped 27 points, or 0.4 percent, to 6,611. Wholesale gasoline lost 4.6 percent to $1.32 a gallon and heating oil slid 3.1 percent to $1.75 a gallon.

The dollar index rose 0.76 percent, with the euro down 0.74 percent to $1.1359.

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