President Trump blames 'loco' Federal Reserve for October's big stock drop

12 October, 2018, 04:36 | Author: Mary Valdez
  • Stock markets

The Dow Jones stock market average dropped by 831 points, which is 3.15 percent of its opening value on Wednesday. The S&P 500 sank 2.3 percent, marking its sixth day of decline. The Standard and Poor's 500-stock index was approaching its longest losing streak in two years.

Larry Benedict, founder of the Opportunistic Trader, said that even while some of the largest names in tech - including Netflix, Amazon, Google and Facebook - saw some of the steepest dips, they are all up significantly for the year. For instance, Netflix remains up almost 70 percent for the year, despite the recent decline.

"Yes, they're down, but they're definitely the best performers", Benedict said.

FILE PHOTO: Flags fly above the Federal Reserve building in Washington, DC, U.S., August 22, 2018.

The 10-year Treasury yield rose to 3.22 percent from 3.20 percent late Tuesday after earlier touching 3.24 percent. Many observers expected that would trigger a sell-off in the stock market as investors flooded their cash into Treasurys.

But a fall would be a concern to the president, who frequently cites stock market performance as a sign of his administration's success.

Investors are leaning into safer stocks with steady dividends - utilities and consumer staples - and pulling out of the higher-paying, higher-risk stocks as other guideposts of growth, like the communication sector, tumbled.

"The fundamentals and future of the USA economy remain incredibly strong", she said, pointing to a 50-year low in unemployment, tax cuts, reduced regulatory burdens, bigger paychecks, and new trade deals that have specifically benefitted farmers, ranchers, and manufacturers.

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Numerous biggest U.S. names fell hard in Wednesday's session, with Apple, Boeing and Facebook all slumping more than four percent and Amazon, Nike and Microsoft shedding more than five percent. European indexes shed a little less than 2 percent. Wages increases have been restrained by the large pool of unemployed workers represented by the historically low labor force participation rates.

President Donald Trump signaled his anxiety about the Federal Reserve's plan to keep raising interest rates into 2019 after stocks plunged on Wednesday.

Trump blamed the Federal Reserve - and his appointee Powell - for the big drop Wednesday.

"It's a correction we have been waiting for a long time", Trump said. "The Fed has gone insane".

Ivan Feinseth, Chief Investment Officer at Tigress Financial Partners, said that although the losses caught him off-guard, he thought many investors were unduly frightened by the rising rates.

One former Treasury official said while Trump's comments are unusual, they don't appear to be changing the Fed's direction. "The Fed will stay on a measured pace".

She said in addition to rising interest rates, investors also fear that company profit margins will be squeezed by rising costs, including the price of oil.

Bourses in Paris and Frankfurt both lost more than two percent, while London fell 1.3 percent.

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