A gauge of stocks worldwide posted an eighth straight decline on Monday as investors ignored Trump administration attempts to reinforce confidence and the USA president called the Federal Reserve the "only problem our economy has".
Top U.S. financial regulators assured Mnuchin during a hastily organized call Monday that they are seeing nothing out of the ordinary in markets despite the recent stock slump, according to a person familiar with the discussion.
Stocks are on pace for their worst December since the Great Depression.
Mnuchin says that the negative market reaction following the Federal Reserve's rate hike was "completely overblown".
"More than anything else right now Washington and politics are absolutely driving investor sentiment and market direction and that can turn on dime", said Oliver Pursche, a board member at Bruderman Asset Management. "You don't look at a bad quarter to judge a portfolio that's around 5, 10, or 20 years". Trump appointed Powell as Fed chairman. Although the closure of some government services isn't expected to hurt the economy, the inability of lawmakers and President Donald Trump to put politics aside to enact a budget is unnerving to investors.
Even with U.S. stock markets on the skids for weeks, and the Federal government in a partial shutdown since last Saturday, that left many market-watchers wondering whether there is something more systemic going on that they had not realised.
Powell offered an explanation for the hikes, stating the Fed could gradually raise borrowing costs and limit potential US economic growth because of the current strength of the job market.
No Fed chairman has ever been removed by a president.
Mnuchin on Sunday released an unusual statement to say he had called the CEOs of the country's biggest banks.
At that time, however, the market also still reflected a modest probability of the Fed getting in one more increase in 2019.
The day's downdraft hammered crude oil prices: West Texas Intermediate, the benchmark USA crude oil, tumbled 6.7 percent to $42.53 per barrel. Inflation is tame. Pay growth has picked up.
The president's criticism of the Fed has been a break with historical precedent and has sparked concern among economists. Adding to the disquiet is the lack of clarity over whether Trump could in fact dismiss Powell.
Trump has frequently criticized the Fed's raising of interest rates this year.
But Mnuchin's response to the market concerns - calling bank executives and convening the Plunge Protection team - was seen as an overreaction in Wall Street circles.
Mulvaney said fundamentals of the economy are strong, with unemployment low and capital investment high.
The US president has repeatedly exerted pressure on the Fed to hold off on rate hikes, saying that the monetary tightening will impede economic progress.
In addition, the S&P fell 7.1 per cent and the Nasdaq Composite sunk into a bear market.
By the thinnest of margins, the S&P 500 was spared its first 20 percent decline since 2009, a period that spans two presidential administrations and three Federal Reserve chairs. The Dow Jones Industrial Average fell 1.6 percent to end 1.2 percent above a bear.
Last week the Dow lost 1,655 points, or 6.8 percent. The Russell 2000 index of smaller-company stocks gave up 5 points, or 0.4 percent, 1,286.
MARKETS LOWER AGAIN If Mnuchin's efforts were meant to soothe markets, that was not evident early on Monday as Wall Street traded sharply lower in a shortened session ahead of Tuesday's Christmas holiday.
The Federal Reserve building is pictured in Washington, DC, U.S., August 22, 2018.