Trump once boasted of market gains, now tweets cause drops

Posted December 26, 2018

Trump reaffirmed his claim on Twitter Monday that he had approved a contract for the construction of the 185km wall in Texas, although the White House has not offered any details on the project. He complained again about the Federal Reserve and its chairman, Jerome Powell, saying that "they're raising interest rates too fast".

The S&P 500 ended down about 19.8 percent from its September 20 closing high, just shy of the 20 percent threshold that commonly defines a bear market.

"It was totally out of left field and an odd thing to do", the person said, describing the timing of the call - on a Sunday before markets opened - as unusual.

The following day, Mnuchin announced he had called senior executives from six of the largest American banks to discuss the market turmoil and received assurances. Earlier in the week, it had been reported that Trump had wanted to fire Powell.

Rep. Maxine Waters, a California Democrat and the incoming chairwoman of the House Financial Services Committee, said in a statement on Monday night that "The financial markets need certainty, and a Federal Reserve that can independently set monetary policy".

Mnuchin said the heads of Bank of America, Citigroup, Goldman Sachs, JP Morgan Chase, Morgan Stanley and Wells Fargo all assured him they have ample money to finance their normal operations, even though there have been no serious liquidity concerns rattling the market.

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Trump has previously said he considers the stock market's performance to be indicative of his success in office, as a sort of report card for his presidency. The National Retail Federation estimated 134 million people ー or approximately 41 percent of the USA population ー hit the stores on Saturday.

U.S. SHUTDOWN: The partial U.S. government shutdown that started Saturday is unlikely to hurt the economy much, although it may deprive the financial markets of data about global trade and gross domestic product.

Closed on Monday for a national holiday, Tokyo plummeted at the open on Tuesday, suffering its worst finish since April 2017 after a brutal holiday-shortened session on Wall Street that saw USA stocks sink for a fourth straight session.

While President Trump's displeasure with Powell has intensified in recent days, Fed watchers and investors know that it goes back several months.

But the source painted a different picture of Mnuchin's standing behind the scenes. He cited 5-year-old restrictions on banks using their own capital to make speculative market bets, known as the Volcker Rule.

Mnuchin spoke on Sunday with the heads of the six largest USA banks, who confirmed they have enough liquidity to continue lending and that "the markets continue to function properly".

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They are also concerned that the Feds may continue to raise interest rates next year.

Bank stocks were among then biggest decliners Monday.

But investors said his move to convene a call on Monday with the President's Working Group on Financial Markets, commonly as the "Plunge Protection team", may have weighed on investors on Monday.

Mnuchin meets regularly with Powell and it's not unheard of for a Fed chair to meet with the President, though it's rare since the position is meant to be independent of politics.

Trump was quick to deny the reports, tweeting that he was "extremely happy and proud of the job being done by US Treasury Secretary Steven Mnuchin".

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McCarthy said he was optimistic that some deal could be reached within Congress ahead of the Friday deadline. Congress did pass legislation to fund much of the government through the fiscal year, until October 1.