Another brutal week out of the stock market, the start of the worst 38 years since December, and the fed’s policy makers meeting may not provide some of the steps investors took at the end of their two-day policy meeting on Wednesday. Economists.
How bad is it? The stock market ended a week of regular reshuffles and decided to move lower on Friday.
Dow drops dow Jones industrial average djia, + 1.74% is down nearly 500 points, more than 10% from its all-time high close in early October and in line with the widely used definition of a market correction. It joins the s&p 500 SPX, + 1.09% and nasdaq composite index, + 0.61% already in correction mode. Stocks extended losses to sharp declines on Monday.
It’s not an auspicious start to a month, it’s historic for the stock market. In the first nine trading days of the month, the dow was down 5.6%, the s&p was down 5.8% and the nasdaq was down 5.7%. It was the worst start to December for all three benchmarks since 1980, according to dow Jones market data.
“There is a lot of uncertainty in the market,” said Tom Smith, chief us economist at RBC Capital Markets. That sounds bad, but convincing the fed to pause while raising rates may not be enough, Tom polcelli said in a note.
Comments from fed officials, including Jerome Powell, have led some investors to seek a possible end to the central bank’s rate-hike cycle after the December rally, but bocelli believes the still-strong economic data mean the debate should focus more on policymakers’ expectations for three or more increases in 2019, which is worth mentioning.
Despite the significant rise in volatility, “the stock market did not deteriorate enough to warrant a pause,” said Porcelli, noting that unlike the emerging market crisis of 1998, U.S. stocks were flat when the market fell sharply and returned today and have been flat throughout the year.
“On this basis, it is worth pointing out that you cannot prove there is a negative wealth effect in the context of this macro impact,” he wrote.
PAAMCO managing director Putri Pascually also said investors could misread the fed and pointed to a “” significant divergence” “between the fomc’s forecasts for future rate hikes and market expectations.
“If the fed focuses on tight labor markets and wage growth and continues its hiking trail, don’t bet on fundamentals to save the day,” Pascually said in a note. “Positive growth on a global basis may not be sufficient to overcome broad revaluations of risk assets. Macro risks such as trade wars and brexit continue to add to the risk ledger.”
Investors will be watching the fed’s policy statement, Powell’s comments and fomc members’ interest rate forecasts.
Friday’s selloff, which was tied to weaker-than-expected economic data from China and the euro zone, appeared to offset optimism in Washington and Beijing about progress in easing trade tensions.
Meanwhile, strong U.S. economic data, November retail sales data showing healthy consumers and a healthy start to the holiday shopping season underscored solid domestic fundamentals.
“At the end of the day, we checked that the fed was addressing the fundamentals of the economy, not the market’s thinking, and seemed completely unwilling to acknowledge that the U.S. economic backdrop was very solid,” Mr. Bocelli said.
The fed meeting dominates the economic calendar for the coming week, with investors seeking a quarter-point hike in the fourth such move in 2018.
Other highlights included new home starts and building permits data for November on Tuesday, existing home sales data for Wednesday, revised gross domestic product data for the third quarter in November, durable goods data for November and personal income and spending data for November on Friday.