Nasdaq Drops 20%, Enters Bear Territory

Nasdaq Drops 20%, Enters Bear Territory

The Dow dropped 464 points, or 2%, on Thursday. The Nasdaq 100 Index was priced at nearly 28 times earnings as recently as March, compared with 23.3 times for the S&P 500.

Markets across Asia are nearing gloomy milestones, with the Topix and South Korea's Kospi heading into bear market territory, or down over 20 percent from their recent highs, to join Shanghai and Hong Kong's Hang Seng. The S&P 500 declined 1.6%.

December is generally the strongest time of the year for us stocks.

The strong U.S. dollar also has made American goods more expensive.

The Federal Reserve has raised its key interest rate for the fourth time this year to reflect the USA economy's continued strength but signalled that it expects to slow its rate hikes next year.

"The indices are headed for another volatile, negative session as options expirations, turmoil in the White House and a renewed possibility of a partial government shutdown continue to shatter the nerves of investors", said Peter Cardillo, chief market economist at Spartan Capital Securities in NY.

"As he said he considers the Federal Reserve Board Chair Jerome Powell a very good man and that he is not interfering with Fed policy decisions", the White House said in a statement. Although a short-term shutdown would not have a large impact on the national economy, it would serve as a reminder of government dysfunction.

The mere idea of President Trump trying to influence decisions made within the Federal Reserve could cause markets to become uneasy, but firing the chairman simply because his opinions and ideas go against his own, would be a first for a President. That's confirmed by the reaction in the bond market. The stock market was consistently negative, declining by a maximum of about 3.8%.

Worries about a supply glut knocked oil into a bear market last month.

Benchmark U.S. crude dipped 0.2 percent to $45.77 a barrel in NY.

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Some, including me, expressed concerns about the risks and unintended consequences of central banks continuously "goosing" markets.

But with financial markets in turmoil and fears of recession growing, some critics are questioning the plan.

World's second-largest stock exchange lost almost 3 percent, bringing its losses to 20 percent from its previous high.

And investors fled risky stocks.

At a news conference after the Fed's announcement, Powell said Trump's tweets and statements would have no bearing on the central bank's policymaking.

Fresh economic forecasts showed officials at the median now see only two more rate hikes next year compared to the three projected in September. And Powell suggested the Fed will keep shrinking its balance sheet despite the market mayhem. The tech-heavy index dropped to its lowest level since August 2017.

"Looking ahead, we expect momentum to continue to fade as tailwinds from fiscal stimulus dissipate and rising headwinds from tighter financial conditions, slower global growth, reduced energy investment and heightened trade tensions start to weigh", he said in a research note. The US action underscores the fragile nature of the trade ceasefire between Washington and Beijing. However, he also noted that the "strong economy is benefiting many Americans".

Despite the losses, David Kelly, the chief global strategist for JPMorgan Funds, said the market will ultimately react to the health of the economy. "The Federal Reserve is doing its job - and it's doing it patiently and cautiously".

Tokyo led the downward charge in Asian stocks Thursday, sliding 1.7 per cent. The softer outlook on pricing pressure follows several months of lower inflation forecasts, based on the yield spreads on nominally priced government bonds less their inflation-indexed counterparts.

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