Wall Street hoped for a Santa Claus rally but instead got a Yuletide massacre on Monday — with the Dow collapsing by 653 points, a 2.9 percent plunge that marked the worst Christmas Eve in its 122-year history.
And Wall Street is now on track for its most dismal December since 1931, when the markets lost 14.53 percent in the throes of the Great Depression.
The Dow is down 4,034 points — a staggering 13.63 percent — for the month with only a handful of trading days left in the year and no solution to the government shutdown in sight.
The widely watched index closed at 21,792, down from the 2018 high of 26,828 on Oct. 3 — nearly a 19 percent drop.
Investors and traders were hoping for a Santa Claus rally, a historical trend where stocks usually climb in the last weeks of December.
But that seemed unlikely following Monday’s rout, which analysts blamed on President Trump’s trade war and for raising interest rates, the government shutdown, a slowing global economy and White House chaos in general.
“What we’re seeing here is a total breakdown in confidence,” Peter Cardillo, chief market economist with Spartan Capital Securities in New York, told The Post.
“This is a chaotic White House and there are worries about the economy heading toward a slowdown or a possible recession in 2019,” he added. “It’s all about the trade war, not the Fed. The Fed needed to do what they had to do and they did it. Markets lost trust.”
Jack Ablin, chief investment officer at Cresset Capital in Chicago, pointed the finger at Team Trump for the sell-off, specifically at Treasury Secretary Steve Mnuchin’s calls to top bankers Sunday seeking assurances about the economy.
“Between Trump’s tweets and Mnuchin’s calls, it’s like the administration can’t get out of their own way,” Ablin told The Post.
“They are not engendering confidence in the leadership of this country.”
Mnuchin’s calls, in which he asked about the banks’ liquidity, backfired by sparking fear, according to market analysts.
“His intentions were positive but in a nervous market, it obviously didn’t work,” said Quincy Krosby, an analyst for Prudential. “It confused the market.”
But, Ablin added, even a shred of good news could send the markets up before year’s end.
“I see investor sentiment that’s down so low, it rivals the sentiment we saw during the financial crisis,” he said. “Any piece of good news could create a nice bounce.”
Trump on Monday lashed out at Powell, whom he reportedly wanted to fire over the weekend for raising interest rates.
“They don’t have a feel for the Market, they don’t understand necessary Trade Wars or Strong Dollars or even Democrat Shutdowns over Borders. The Fed is like a powerful golfer who can’t score because he has no touch — he can’t putt!” from the White House.
Trump has repeatedly ranted over the Fed’s decision to raise its key short-term rate four times this year, moves intended to prevent the economy from overheating at a time of brisk growth and an unemployment rate near a 50-year low.
At a news conference last week, Powell explained that the rate hikes were evidence of the economy’s strength.
Peter Conti-Brown, a financial historian at the Wharton School of the University of Pennsylvania, said of Trump, “He is seeking open warfare on Christmas Eve.
“We’ve never seen anything like this full-blown and full-frontal assault,” Conti-Brown added. “This is a disaster for the Fed, a disaster for the president and a disaster for the economy.”
Meanwhile, top financial regulators assured Mnuchin on Monday that markets were functioning normally despite the slump, .
Mnuchin spoke with the regulators to discuss market stability, two days after Bloomberg reported that Trump had discussed firing Powell out of frustration with months of losses in equity markets.
Mnuchin didn’t clear with Trump his decision to convene the meeting of financial regulators before announcing it Sunday, the news service reported.
Nor did he consult the president on a separate decision to ask the nation’s biggest banks about their ability to lend to consumers and other financial companies.
Both moves added to a sense of alarm among investors already rattled by the report the president had considered dismissing Powell.
Democratic Party leaders
“It’s Christmas Eve and is plunging the country into chaos,” they tweeted. “The stock market is tanking and the president is waging a personal war on the Federal Reserve — after he just fired the Secretary of Defense. #TrumpShutdown.”
Additional reporting by Carleton English