U.S. stocks capped their worst week since the August selloff as optimism over the economy’s strength gave way to anxiety over the Federal Reserve just as commodities and credit markets flashed signs of danger.
The Standard & Poor’s 500 Index fell 3.8 percent in the five days to end at a two-month low. Energy shares plunged as the cheapest crude oil since 2009 rekindled anxiety over deflation before the Fed’s Dec. 16 policy decision. Financial shares, the ostensible beneficiaries of any rate hike, tumbled 5.4 percent, as asset managers were routed after a high-yield mutual fund suspendedredemptions.
Optimism that the U.S. economy is strong enough to withstand higher rates transformed into anxiousness, as a commodity selloff clouded the prospects for a global recovery and rekindled deflation concerns. The benchmark U.S. equity gauge ended at its lowest level since October amid concern that a rout in high-yield credit markets will spread at the same time that money managers must cope with shifting monetary policy.
“We have the continued decline in oil prices related to excess supply, and there’s market anxiety relating to the commodity complex due to the ongoing China unknown,” said Alan Gayle, senior strategist for Atlanta-based Ridgeworth Investments, which has about $42.5 billion in assets. “These factors have more than offset the relative strength of November economic data.”
I have discussed all this and more in my Friday Audio, touching on a number of topics, including China’s economy, government debt, the Middle East wars, European tensions aggravated by the out of control migrant crisis and last but not least, commodities.Back to top