The Dow Jones Industrial Average lost 433 points, or 1.93% to 22,012, with all of its 30 components trading lower in midday session on Monday. Tech-heavy Nasdaq remained in the bear market territory after shedding 53 points, or 0.84% to 6,280.
The Russell 2000 index, which is also in a bear territory, gave away 4 points, or 0.31%, to 1,288., while the Standard & Poor’s 500 dropped 7.1%.
Nike Inc. was one of the biggest decliners, giving up 2.8%, while shares of Microsoft Corp. dropped 2.4%. Boeing Co. lost $4.09, or 1.3% as Apple Inc. sank 1.2%. Amazon.com was one of the worst hit FAANG stocks after losing 4%. Bear markets are characterized by a downturn of 20% or more in prices of stocks over a timeframe of at least two months.
Investor confidence tends to be extremely low when markets enter the bear territory. Investing when stock prices are falling can very risky even for seasoned traders. As such, many of them choose to sell off their stocks during bear periods to avoid incurring losses from the slumping stock prices.
Monday’s downturn may have been triggered by political events and news, with multiple reports saying President Donald Trump is devising how to oust Federal Reserve chairman Jerome Powell from his position. The President continues to criticize the Fed, which has hiked interest rates four times this year. Trump has even called the central bank the “biggest threat” to the U.S. economy.
On Tuesday, the President took to his personal Twitter account saying, “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!”
Over the weekend, U.S. Treasury Secretary Steven Mnuchin held discussions with heads of the biggest banks in the country and announced plans to set up the “Plunge Protection Team” aimed at maintaining liquidity. Shares of Bank of America, Citigroup, and JPMorgan were all down on Monday.
The resignation of James Mattis as U.S. Defense Secretary might also have played a role in Monday’s plunge. Mattis stepped last week following President Trump’s decision to withdraw American troops from war-ravaged Syria. In his resignation letter, Mattis said his views that include treating US allies with respect, do not align with those of Trump.
U.S. stock markets close at 1 p.m. ET on Monday and will not open on Tuesday for the Christmas Day. They will resume normal trading on Wednesday, December. 26.