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'Twas The Night Before Christmas, And The Stock Market Was Bad

Stocks are plunging downward, Trump is tweeting angrily about the Federal Reserve, and Steve Mnuchin is stoking fear. Merry Christmas!

Posted on December 24, 2018, at 3:29 p.m. ET

Brendan Mcdermid / Reuters

The New York Stock Exchange had its worst Christmas Eve ever.

The S&P 500, a compilation of the NYSE's 500 most valuable companies, lost 2.7% of its total value on Christmas Eve amid political chaos. The Dow Jones Industrial Average, a grouping of the 30 largest US-based companies on the NYSE, declined 2.9% the same day.

Both are indicators of the overall health of the stock market, and both suffered their largest Christmas Eve drops ever and their most severe December dives since the Great Depression.

The US stock market had been rising steadily in 2016 and 2017 and appeared to be doing the same in 2018, but dips in the past few months have erased this year's earlier gains.

The losses arrived as President Trump attacked the Federal Reserve — which hiked its benchmark interest rate a quarter point last week — on Twitter.

Trump tweeted Monday that the Federal Reserve, which regulates US monetary policy, was "the only problem our economy has." The president reportedly discussed firing Federal Reserve Chair Jerome Powell, which he likely does not have the power to do. A move like that could lead to destabilization in the markets around the world.

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. The Fed is like a powerful golfer who can’t score because he has no touch - he can’t putt!

Trump compared the Reserve to a bad golfer — "he can't putt!" — and said as an institution it "doesn't understand necessary Trade Wars or Strong Dollars or even Democrat Shutdowns over Borders," referencing his own escalating trade war with China and the federal government's partial shutdown caused by a dispute over funding for a wall along the US–Mexico border.

Trump has made repeated attacks on the Federal Reserve as it's raised interest rates throughout the year.

“The market is lacking full confidence in the Fed right now, but part of it is Trump’s undermining of it,” Stephen Myrow, a managing partner at Beacon Policy Advisors, told Bloomberg News.

Brendan Mcdermid / Reuters

Treasury Secretary Steven Mnuchin also sent chills through the stock market with a phone call to the CEOs of the six biggest banks in the US — Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley, and Wells Fargo — asking if they had cash reserves on hand to lend to consumers and businesses.

He was attempting to stanch the markets' bleeding from earlier weeks. In a statement posted to Twitter Sunday, Mnuchin said, "The CEOs confirmed that they have ample liquidity available for lending to consumer, business markets, and all other market operations."

Today I convened individual calls with the CEOs of the nation's six largest banks. See attached statement.

Mnuchin's comments shook traders and appeared to foreshadow a possible recession in 2019, a prediction that executives at financial companies have likewise made.

Ed Mills, a financial analyst with the firm Raymond James, told CNBC that Mnuchin's call created "more questions than answers. ... No one had seemed to raise any concerns related to these issues of which Mnuchin is seeking to reassure the market."

Markets closed at 1 p.m. Christmas Eve and will remain closed until Wednesday.

The White House, the Treasury, and the Federal Reserve did not immediately respond to requests for comment.


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