How major U.S. stock indexes fared Thursday

How major U.S. stock indexes fared Thursday

The major U.S. stock indexes plunged for a second day as investors continued to try to make sense out of the U.S. Federal Reserve's decision to raise its benchmark interest rate and continue to let its massive balance sheet shrink at the current pace.

The benchmark S&P 500 index is in what Wall Street calls a correction, and is headed toward a bear market, threatening to end the more than 9-year USA bull market run.

At 1:20 p.m. ET, the Dow Jones Industrial Average was down 169.07 points, or 0.74 percent, at 22,690.53, the S&P 500 was down 24.57 points, or 1.00 percent, at 2,442.85 and the Nasdaq Composite was down 127.58 points, or 1.95 percent, at 6,400.83. The S&P 500 is now down 7.7 per cent for the year and the Nasdaq is on the verge of a "bear market", which is a drop of 20 per cent from its peak this year.

After steady gains through the spring and summer, stocks have fallen sharply in the fall as investors worry that global economic growth is cooling off.

"Nasdaq is your more growth-oriented story, so the biggest stocks are driving the overall market because they're a bigger chunk of it", said Kim Forrest, senior portfolio manager at Fort Pitt Capital Group in Pittsburgh.

Although historically considered a strong month for markets, this December has proved dismal for benchmark indexes. Without a decent rally, this could be the worst December since 1931. And the S&P 500 shed 2.1%.

Stocks are now headed for their single worst month since October 2008, when the market was being battered by the global financial crisis. The tech-heavy Nasdaq composite slipped 27 points, or 0.4 percent, to 6,611.

After steady gains through the spring and summer, stocks have fallen sharply in the fall as investors worry that global economic growth is cooling off and that the US could be headed for a recession in the next few years. And rising interest rates in the US could slow its economy even more.

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U.S. President Donald Trump has refused to sign legislation to fund the U.S. government unless Congress authorizes money for a Mexico border wall, thus risking a partial federal shutdown on Saturday.

He said speculation that the USA economy could be headed for a recession has picked up, dampening global sentiment.

Among other threats: the trade dispute between the USA and China, and rising US interest rates, which act as a brake on economic growth by making it more expensive for businesses and individuals to borrow money. And the Federal Reserve added to those concerns this week by signaling that its rate-increase plan will continue into 2019 despite downgrading its economic growth forecast.

Wren said investors felt Fed Chairman Jerome Powell came off as unconcerned about the state of the USA economy and fears that the economy could not just slow down, as expected, but go into a recession in 2019 or 2020.

"I think clearly you have a situation here where the market has overreacted to the Fed's comments, and you see programmed trading taking over", he said in an interview with Fox Business Network. The Dow Jones Small-Cap Value TSM Index closed at 8514.68 for a loss of -97.57 points or -1.13%.

It is the biggest weekly percentage drop since August 2011 while the Nasdaq's 8.36% decline is the sharpest since November 2008. A bear market occurs when the index or stock falls 20 per cent or more from the peak.

Oil prices, which slid just over 4 percent on Thursday, tumbled to their lowest since the third quarter of 2017. The bond-buying has the effect of sending long-term bond yields lower, which reduces interest rates on mortgages and other kinds of long-term loans.

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