After a failed rebound attempt in the morning, the US stock markets plunged again Friday, for the third consecutive session. They suffered a negative week, with a fall of over 7% in major indices, their worst week since August 2011. The Nasdaq Composite even entered a “bear market” (a downtrend) characterized by a drop of more than 20% from its last peak. Politically, the risk of a “shutdown” of the federal administrations at midnight (Washington time) and the surprise resignation of the Secretary of Defense, James Mattis, had shaken the confidence of the markets. In addition, uncertainties about world trade, growth and interest rates continued to undermine people’s minds.
At closing, the Dow Jones lost 1.81% to 22,445 points, while the S&P 500 fell by 2.06% to 2,416 pts and that the Nasdaq Composite Index , rich in technology and biotechnology stocks, tumbled 2.99% to 6.333 pts. All sectors of the S & P 500 have fallen, led by communications services (-3%), technology (-3%), consumer discretionary products (-2.58%) and financials (-1, 9%).
The Nasdaq now fallen into a “bear market.” Over the week, the three indices have dropped 6.8% for the DJIA, 7% for the S & P 500 and 8.3% for the Nasdaq. The index has fallen 22% since its last historic record in August when it marked 8,109 pts. It has returned to its lowest level since September 2017, and has dropped 8.2% since the beginning of 2018. However, over the longer term, the Nasdaq has grown by 53% over the past five years, and has been multiplied by nearly 5 since March 2009, when it was at 1,300 points, at the worst moment of the financial crisis.
The partial shutdown became effective after politicians failed to reach an agreement over budget for the wall along Mexico border demanded by President Donald Trump. He threatened that the shutdown “will take a long time” if the Democrats do not agree on Mexico border wall. The departure of Defense Minister James Mattis also increases the political uncertainty.
Earlier in the day, John Williams of the Federal Reserve still led to a revival of the rate hike. He stated that the American central bank looks at the economic figures in its interest rate policy and keeps an eye on the markets. Interest policy is not fixed, according to Williams. Earlier this week, the Fed raised interest rates for the fourth time this year.