S&P Suffers Worst Christmas Eve Crash On Record: “It would be in our nation’s best interest if the President and Treasury Secretary stopped what they are doing.”

“The recent actions of the President and the Treasury Secretary, however, have been erratic and are creating uncertainty and instability in the markets. It would be in our nation’s best interest if they stopped what they are doing.”

A Horrified Wall Street Reacts To The Mnuchin Massacre

by Tyler Durden ZeroHedge Dec 24, 2018

Heading into December, a majority of traders still quietly hoped that the volatility observed in October and November would finally fade, and give way to the traditional Santa rally allowing them to escape what in just two months had mutated into a devastating year for most, unscathed: after all, in the past century, December has not only been the month with the highest average stock market return, but the month which has closed in the green on 74% of instances, the most of all other months of the year.

It was not meant to be.

Instead of being the best month of the year, this December has been the worst month for the stock market since the Great Depression – the average one-day drop in the S&P this month has been 1.6%   and was appropriately capped with a Christmas Eve crash which not only saw it plunge almost 3% – the biggest pre-Christmas plunge on record – closing at a 20-month low, but in the frenzied liquidation which saw more than 1.7 billion shares changing hands in the painfully illiquid half-day session which deepened losses after the worst week since 2011, as it closed, the S&P triggered a bear market, sliding 20% from the Sept 20 all time highs, and putting an end to the longest bull market in history.

While the reasons for the relentless three month selloff are legion, starting with the “renormalization” (i.e., bursting) of the biggest asset bubble blown in history by the Fed and other central banks, and continuing through trade war tensions, rising and/or falling interest rates, political gridlock and instability in the US and elsewhere, peak profit fears, and economic slowdown concerns, the immediate catalysts for today’s plunge are two: Trump’s ongoing feud with the Federal Reserve (which today we learned, can’t putt) and its Chairman, Jerome Powell, who may or may not be fired soon, and Mnuchin bizarre, crisis-era announcement that bank liquidity is fine, even though not a single person in the market doubted that not to be the case, prompting a chill down traders’ spines that bank liquidity was not, in fact, fine.

So while we got the market’s verdict loud and clear to what will forever be known as the “Mnuchin Massacre,” here is a sample of what analysts, investors and pundits are saying:

Cowen & Co.’s Jaret Seiberg

  • “None of these controversies are positive,” the senior policy analyst wrote. “All of them put the economy at risk, which is negative for financial firms and housing. And all three incidents are unforced errors,” Seiberg wrote, referring to Trump’s discussion of Fed Chairman Jerome Powell’s ouster, the partial government shutdown and Mnuchin raising questions about financial stability.
  • “Our broad concern is that Team Trump might trigger the very downturn it wants to avoid.”

Amundi Pioneer Asset Management’s, Paresh Upadhyaya

  • Mnuchin’s statement about banks “clearly backfired,” Upadhyaya said. “It smacks of desperation and nervousness. I found it odd that he spoke to them about liquidity when it’s obvious that banks would be aware of it. I’m not sure what they planned to achieve with this plunge protection team since none of the agencies involved have legal authority to intervene in the equity markets.”
  • The portfolio manager sees little risk of Powell being ousted. He said that Trump’s undermining of the Fed could reduce the appeal of the U.S. dollar. What’s more troubling is the selloff in bank stocks, which signals distress in the credit market.

MRV Associates Inc.’s Mayra Rodriguez Valladares

  • “The timing is terrible” amid thin markets before a holiday, said Valladares, a former Fed foreign-exchange analyst who conducts training for bankers and regulators. “It’s going to make people in the markets even more nervous.”
  • “When you have a president treating Powell as a piñata, it’s really terrible and undermines the credibility of the central bank as an independent authority.”

Whalen Global Advisors’ Christopher Whalen

  • Mnuchin’s tweet about his talks with bank CEOs was “not helpful,” Whalen said.
  • “It is normal for a secretary of the Treasury to talk to banks privately, but not on Twitter,” he said, citing a “near disaster” in 2008 when markets cratered after then-Treasury Secretary Henry Paulson discussed buying bad bank assets.

Sullivan & Cromwell LLP’s Rodgin Cohen

  • Cohen was at the center of the bank bailouts during the 2008 financial crisis. He said he didn’t field calls from finance executives over the weekend, an indication that the industry isn’t facing the same concerns it was a decade ago.
  • “If you ever get contagion, that could sweep away reality and logic,” Cohen said in an email. “But today, we just don’t have anything like 2008. You’ve got banks which have two to three times the capital, and even more importantly — what really brings banks down — is a liquidity shortage. And these banks are incredibly liquid.”

Last but not least, here is Maxine Waters, soon to be the Chair of the House Committee on Financial Services:

  • “The financial markets need certainty, and a Federal Reserve that can independently set monetary policy. The recent actions of the President and the Treasury Secretary, however, have been erratic and are creating uncertainty and instability in the markets. It would be in our nation’s best interest if they stopped what they are doing.”

And the scariest news: there are 3 more trading days in 2018, and at this rate we may be looking at a 1-handle in the S&P as we usher in the new year.

The Longest Bull Market In History Is Over As S&P Suffers Worst Christmas Eve Crash On Record

The S&P crashed to 2,351.10, closing below its bear market level of 2352.7 – the lowest since April 2017 –ending the longest bull market in history

It was the worst Christmas Eve drop and the worst December for the S&P 500 on record (technically, since The Great Depression although this is interpolated as back then there was no S&P500)

Risk aversion is now extreme; even though the Street may point to a ‘less dovish’ FOMC and concerns about a U.S. government shutdown as possible reasons for the selloff, the apparent lack of positive drivers and headlines has curbed risk appetite,” Nomura strategist Masanari Takada wrote in a note.

“While sentiment looks to be skewed towards fear, most market participants seem to be looking for a plausible excuse to sell.”

Steve Mnuchin epicly failed to calm the market over the weekend…

As Michael O’Rourke, JonesTrading’s chief market strategist, said:

…nothing says don’t panic like saying ‘I’m calling the plunge protection team tomorrow.’ I honestly think that’s the type of event that’s going to startle markets and create more panic and fear when it’s meant to create confidence.”

And sure enough, the plunge protection team’s best efforts utterly failed to stem the tide…


A bloodbath…


As waves of selling hit the market… (very notable for such a normally quiet day – volume was almost double the recent average)

S&P volume set to be almost triple that of the past 9 pre-Christmas sessions



Bank stocks suffered…


And just the mention of the word ‘liquidity’ sent bank credit risk soaring…

Even the supposed safe-haven stocks were pummelled… The S&P 500 utilities index drops as much as 4.6% intraday, most since August 2011, amid the broader market rout and continued threat of higher interest rates in 2019.


And along with stocks, the dollar was dumped wholesale…


And credit markets were monkeyhammered…to their widest since Brexit


Bonds were bid (with 30Y back below 3.00% intraday)…


And inflation breakevens were clubbed like a baby seal…


Yuan strengthened…


Cryptos soared since Friday, with Ethereum up 36% and Bitcoin back above $4,000…


Despite the dollar weakness, crude prices collapsed further as PMs rallied…


Gold soared (in dollars) on the day…


Breaking above its 200DMA…


And gold in yuan broke out of its channel…


WTI tumbled to almost a $43 handle…


Finally, since The Fed hiked rates and Powell didn’t back down on auto-pilot, the S&P is down 8%, the dollar is down over 1%, and gold and the long bond are up around 1%…

And,@IvanOnTech provides a little context for just how bad this bloodbath is…

This is not ICOs, this is NASDAQ % drop from ATHs. Scam? GOPRO -95% FIT -92% LC -91% SNAP -83% P -80% ZNGA -77% HIVE -73% TRUE -66% TWTR -63% SONO -60% DBX -57% Z -57% PS -50% FTCH -49% PSTG -48% SPOT -48% BOX -46% DOCU -45% SVMK -45% FB -42%”

And the odds of a rate hike in 2020 are now the same as the odds of rate-cut.


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