Stocks on Wall Street notched a new low for the year on Monday, as worries about the economy continued to dog investors ahead of a crucial Federal Reserve decision on interest rates later this week.
It was the latest in a string of volatile trading sessions that has left investors limping through the last weeks of 2018. Since stocks reached a record high in September, the market has been buffeted by a range of concerns, from signs that the trade war between China and the United States is beginning to weigh on global growth to worries that higher interest rates will eat into corporate profits.
It made for a shaky day in the markets. Crude oil dove. Corporate bonds were lower. Stocks dropped almost across the board, with shares of tech, health care and small companies as well as blue-chip corporations all lower.
When the dust had cleared, the S&P 500 was down 2.1 for the day and 4.8 percent for the year. Should the market fail to recover, 2018 would be Wall Street’s worst year since the financial crisis a decade ago.
Asian markets followed Wall Street’s drop. By midday on Tuesday, shares in Tokyo, China and Australia were down 1 percent or more, as investors expressed disappointment over a lack of specific proposals in a closely watched speech by President Xi Jinping of China. Still, futures contracts tracking Wall Street suggested that it could open higher on Tuesday morning.
The sell-off came after another indication that the American economy, while still strong, is showing signs of slowing. The Empire State manufacturing index, a somewhat limited gauge of economic sentiment among manufacturers in New York State, tumbled sharply. A survey of American homebuilders also showed sentiment continuing to fall in an area of the economy where rising mortgage rates have hurt affordability and sales.
“Every part of the market has been acting like things are a lot slower,” said Ilya Feygin, managing director at the institutional brokerage firm WallachBeth. “Everywhere, every market is telling you the same thing.”
President Trump sent a Twitter message on Monday calling “incredible” the widespread expectation that the Federal Reserve will raise interest rates when it concludes its monetary policy meeting on Wednesday. Mr. Trump has repeatedly called on the Fed to stop a rate-increase cycle that started in December 2015.
Fed interest rate increases are traditionally viewed as a negative for stock prices, and as evidence mounted in recent weeks that the global economy was starting to slow, investors have increasingly attuned to comments about the Fed’s plans. Many financial market analysts date the start of sharp slump for stocks to comments from the Federal Reserve chairman, Jerome H. Powell, in early October that seemed to suggest that the central bank was intent on raising interest rates further than many had expected.
In late November, Mr. Powell sent stocks up sharply when he said the Fed’s benchmark interest rate was “just below” the neutral level, which many saw as a sign the central bank might not be as aggressive in raising rates as initially thought.
Most investors still expect the Fed to lift its key interest rate when the central bank concludes the two-day meeting on Wednesday, but expectations are growing that the central bank will somehow signal that it is aware that conditions in financial markets have deteriorated sharply, and could reflect real risks for the economy.
The Fed’s decision is likely to be one of the last major events for markets in what has been a difficult year for investors. If investors are disappointed by the Fed’s decision, the market slump could get worse.
“If monetary policy doesn’t change its direction, you will have a significant meltdown on this,” said Steven Ricchiuto, chief United States economist with Mizuho Securities. “So there’s a lot riding on it.”Nytimes has more