The Dow Industrials set a new record for the biggest intraday market plunge with a 1,500 point drop on Monday. The stock market lost $4 trillion over 6 days and the Dow wiped out all of its gains for the year.
The so-called FANG tech stocks (Amazon, Google, Netflix and Apple) were among the hardest hit, losing over $90 billion in just a few hours on Monday.
So what triggered the big stock market sell off?
Market analysts say uncertainty that the Fed will raise interest rates next month triggered a global market sell off.
Others say the ongoing chaos between President Trump and the Democrats is contributing to market volatility.
On Monday, President Trump continued his Twitter war with Democratic leaders including Rep. Adam Schiff of California, the top Democrat on the House Intelligence Committee, whom Trump referred to as “Little Adam Schiff in a Monday morning tweet.
The Federal Reserve, aka the Fed, plans to raise interest rates at least twice this year. The first quarter point rate hike is expected to occur at the next Fed meeting in March.
That, in addition to the chaos going on in Washington D.C., may have caused fund managers and traders to move billions of dollars from equities (stocks) into the bond market which is more stable and yields higher returns if the Fed raises interest rates.
Market traders don’t believe Monday’s stock market plunge will cause the Fed to change its mind about raising interest rates in March — unless the bloodbath continues over the next few days.
Kenny Polcari, director at O’Neill Industries, tells CNBC that the Fed might be persuaded to hold off on a rate hike in March if the market continues its current decline.
“Now if this goes on for another three or four days and we’re down 500, 800, 1,000 points maybe yes,” said Polcari.
Other analysts say the stock market was long overdue for a big correction and now is the best time to buy stocks at fire sale prices.
A correction occurs when the stock market loses 10% of its overall value. A stock market crash begins when the market loses 20% of its value in a single day.
Monday’s stock market loss was 5%.
On Friday, the Dow dropped 665 points on the news that President Trump authorized Devin Nunes of the House Intelligence Committee to release a declassified FBI memo.
The memo detailed the FBI and DOJ’s use of a dossier (reportedly paid for by Hillary Clinton) to acquire a FISA warrant to wiretap then-candidate Trump in 2016.
The drama continued on Monday evening when the House Intelligence Committee unanimously voted to release a Democratic rebuttal memo in response to the controversial GOP FBI memo.
The Democrats’ rebuttal memo will respond point-for-point to the GOP’s allegations that the DOJ and the FBI conspired to spy on a political opponent (Trump).
The Dems’ memo lands on Trump’s desk this week. He can either sign off on the memo or refuse to declassify it and send it back to the committee.
