Wall Street is too focused on negative news, to the point that the three reference indices of the New York parquet suffered the worst week since the financial crisis a decade ago. The month is going the same way if in the final stretch of 2018 the positive signals are still being ignored and the investors let themselves be dominated by nerves, which may be the most complicated December since 1931, during the Great Depression.
The S & P 500, the index that groups the largest listed companies in the United States, fell 2% in the session on Friday and accumulates a decrease of 7% in the week. The selective is now at the level of July 2017. The Dow Jones, the reference of New York parquet, is following an identical trend and is at the level of September 2017 after suffering the worst week since October 2008, coinciding with the last recession .
The situation of the Nasdaq begins to be delicate, because of the ballast effect of technological values such as Facebook, Amazon, Google, Apple or Netflix. Lost almost 3% in the day and more than 8% in the week. The index thus went from being in the correction zone to entering the bear market territory, losing 20% when compared to the last annual maximum. It is something that was not seen in ten years. In your case, return to be as in August 2017.
The three largest indices accumulate losses in the month of 12%. The tension is reflected in the volatility index, which is at 30 points, as in February. Wall Street managed to move up but in October it was again twisted, because the fear of a global slowdown was compounded by the impact of the tariff battle with China, the withdrawal of monetary stimulus in the US and the strength of the dollar. Now the political chaos in Washington is added.
Friday started with an attempt to rebalance. But the mood was skewed at half session and sales accelerated when Peter Navarro, one of the main economic advisors of President Donald Trump, said it would be very difficult to reach a trade pact with China. He also commented that two increases in interest rates are "too many". The Republican expresses almost daily his dissatisfaction with the Federal Reserve.
Reflection of that anxiety, the Bloomberg agency insures that Trump is consulting with his advisers on the legal authority he has to eventually dismiss Jerome Powell as head of the central bank before he fulfills his mandate. It was the president who nominated him a year ago to replace Janet Yellen last February. But the power in this case is in Congress. Even if the legislature came up with a cause, it would only aggravate the situation.
The price of oil is another sign that sentiment in the market changed and reflects the growing fear of an economic recession. It closed the week at $ 45 a barrel, after falling 11%. It is the lowest price since July 2017. The general perception that contrasts with the optimism of the Federal Reserve to justify its latest rate hike. The growth is solid, although Powell admits that it moderates and there are crossed currents.