'Worst Christmas Eve' in US stock market history as Trump takes aim at Federal Reserve amid government shutdown

The stock market has continued to plunge over the holidays after one of its worst weeks since the 2008 recession, as officials warned a US government shutdown could stretch well into the new year.

The Dow Jones Industrial Average, the Nasdaq Composite and the S&P 500 all fell after the Monday morning opening bell, with global analysts worrying Donald Trump’s demands for border wall funding to be included in the next federal spending bill could hamper economic growth in 2019.

The S&P 500 saw a 640-point drop, marking the worst trading day ever on a Christmas Eve as it entered a so-called bear market. The Dow Jones also reportedly saw its worst-ever Christmas Eve with a 2.9-per-cent drop. US stocks are on track for their worst December since 1931, during the depths of the Great Depression.

Monday ended with historic lows after the president used Twitter to attack the Federal Reserve, writing: “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.”

“The Fed is like a powerful golfer who can’t score because he has no touch – he can’t putt!” he continued, amid a massive slide in the markets.

Meanwhile, the White House administration arranged a phone call on Monday with top US regulators to discuss financial markets as stocks fell again amid concern about slowing growth, the government shutdown and the independence of the Federal Reserve, the Treasury Department said.

Treasury Secretary Steven Mnuchin will host the call with the president’s Working Group on Financial Markets, known colloquially as the “Plunge Protection Team.”

On Sunday, Mr Mnuchin made calls to top US bankers and got reassurances that banks were still able to make loans, the Treasury said. US stocks have fallen sharply in recent weeks on concerns over slowing economic growth, with the S&P 500 index on pace for its biggest percentage decline in December since the Great Depression.

If Mr Mnuchin’s efforts to poll the top banks on their financial health and convene a call of a group of officials who typically meet to address a crisis was meant to soothe markets, that was not evident early on Monday as Wall Street traded sharply lower in a shortened session ahead of Tuesday’s Christmas holiday.

All the 11 major S&P 500 sectors were lower, and all the 30 components of the Dow Industrials were in the red, pushing them closer to bear territory. However, trading volumes are expected to be muted, with markets closing at 1pm ahead of the Christmas holiday, and could exaggerate movements.

A statement by Mr Mnuchin on Sunday about his conversation with the banks and plans to convene the so-called Plunge Protection Team “was not especially comforting, however, given that investors had not generally been questioning market functioning in recent days, despite large declines,” Nick Bennenbroek, currency strategist at Wells Fargo in New York, wrote in a note to clients.

Wall Street is also closely following reports that Mr Trump has privately discussed the possibility of firing Federal Reserve Chairman Jerome Powell. Mr Mnuchin said on Saturday that Trump told him he had “never suggested firing” Powell.

The meeting of the working group also comes amid a partial government shutdown that began on Saturday following an impasse in Congress over the president’s demand for more funds for a wall on the border with Mexico.

The Plunge Protection Team, which was also convened in 2009 during the latter stage of the financial crisis, includes officials from the Federal Reserve as well as the Securities and Exchange Commission.

“Markets (are) still under pressure from last week’s more hawkish Fed update, exacerbating fears about slowing growth and more expensive refinancing following years of stimulus,” said Mike van Dulken, head of research at Accendo Markets.

The political uncertainty has only added to the air of risk aversion, punishing equities to the benefit of bonds. Ten-year Treasury yields were near their lowest since August, having fallen over 40 basis points in just six weeks.

Additional reporting by Reuters