The stock market entered correction territory (when stocks fall 10% or more from a recent market high) for a few minutes today, plummeting 1,500 points before rebounding slightly to a 1,175 point loss on the day.
Why it matters: Between today and Friday's 666 point drop, the market has erased its 2018 gains.
The big picture, as noted by the N.Y. Times on Friday: "[W]hat is really worrying investors is that the fuel behind this stock market boom, namely cheap money from global central banks, may disappear sooner than they thought... On Friday, the yield on the 10-year Treasury note — a widely used gauge for overall interest rates — rose to more than 2.8 percent, the highest level since early 2014."
The political considerations, from Axios' Jonathan Swan:
- "One of the strongest arguments Gary Cohn and Steven Mnuchin have been making to Trump to persuade him not to blow up NAFTA or take hardline protectionist trade actions is 'Mr. President, the economy is booming and the stock market is setting records under your leadership. Why would you risk that with these trade actions?'"
- "My question: if they no longer have that argument, what else do they have in their quivers to persuade Trump not to follow his most hardline instincts on trade?"
- Flashback: "I think there's a lot more momentum in the stock market ... tax cuts are not priced in." — White House economics adviser Gary Cohn to me on December 20th.
White House response to market drop: “The President’s focus is on our long-term economic fundamentals, which remain exceptionally strong, with strengthening U.S. economic growth, historically low unemployment, and increasing wages for American workers," said Press Secretary Sarah Sanders. "The President’s tax cuts and regulatory reforms will further enhance the U.S. economy and continue to increase prosperity for the American people.”