Dow falls below 23,000 for first time in 14 months


What Powell's decision means for the markets

Stocks tumbled Wednesday as investors fretted over a growing list of concerns, including slowing economic growth, trade policy and the threat of a U.S. government shutdown.

The Dow lost 464 points, or 2 percent, to close at 22,860, the first time the blue-chip index has closed below 23,000 points since October of 2017. The Dow has lost nearly 1,700 points, or 7 percent, over the last six trading sessions.

The selling in the last two days came after the Federal Reserve raised interest rates for the fourth time this year and signaled it was likely to continue raising rates next year, although at a slower rate than it previously forecast.

Markets are also concerned about the ongoing trade dispute between the U.S. and China, which has lasted most of this year and shows few signs of easing, and forecasts for dip in economic activity next year.

The broader S&P 500 and Nasdaq also lost ground – the tech-heavy index is now down 20 percent from its peak in August.

What worries investors

Scott Wren, senior global equity strategist at Wells Fargo Investment Institute, said Fed Chairman Jerome Powell didn't appear concerned about the state of the U.S. economy despite deepening worries among investors that growth could slow even more.

"He may be a little overconfident," said Wren. "The Fed needs to be paying attention to what's going on."

Fed raises key interest rate despite complaints from Trump

The Fed trimmed its forecast for 2019 economic growth to 2.3 percent after an expected 3 percent GDP gain this year.

Powell acknowledged that the Fed's decisions are getting trickier because they need to be based on the most up-to-date figures on jobs, inflation and economic growth. For the last three years the Fed has been able to tell investors weeks in advance that it was almost certain to increase rates. But things are less certain now, and the market hates uncertainty.

Mnunchin: Market reaction "completely overblown"

The Fed's move to gradually lift interest rates from their ultralow levels during the recovery has drawn fierce criticism from President Donald Trump, who says monetary policy risks snuffing out economic growth.

Treasury Secretary Steven Mnuchin said Thursday that financial markets are overreacting too the Fed's rate hike this week.

"I think the market reaction is completely overblown," Mnuchin said in an interview with Fox Business, noting that the economy is still projected to out-perform other countries next year.

Mnuchin said computerized program trading is driving stock prices down further, adding that he believed markets were disappointed in Powell's comments at a news conference following Fed's latest policy statement.

Trump: Federal Reserve thinks "our economy's too good"

Despite the Fed's forecast for slower growth, Mnuchin said the administration still thinks it can achieve 3 percent annual growth next year as well.

On the issue of whether the current trade negotiations between the U.S. and China will be able to reach a deal to avoid more penalty tariffs, Mnuchin expressed cautious optimism.

"We've been having ongoing trade discussions by phone over the last few weeks," he said. "We are moving forward with those discussions and trying to reach an agreement … which covers the whole range of issues."

Where the money is going

Investors are responding to a weakening outlook for the U.S. economy by selling stocks and buying ultra-safe U.S. government bonds. The bond-buying has the effect of sending long-term bond yields lower, which reduces interest rates on mortgages and other kinds of long-term loans. That's generally good for the economy.

At the same time, the reduced bond yields can send a negative signal on the economy. The bond market has correctly predicted several previous U.S. recessions by buying long-term bonds and sending yields down.

First published on December 20, 2018

© 2018 CBS Interactive Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press contributed to this report.

Rising interest rates? Not for savers

Even as the Fed keeps hiking, rates on savings accounts at big banks remain in the basement

updated 3M ago

Dow falls below 23,000 for first time in 14 months

After years of easy money, investors are spooked by rising interest rates and slowing U.S. growth

updated 6M ago

Experts: Don't send sensitive info on Facebook Messenger

"I would not trust Facebook with any of my information in a million years," one cybersecurity expert told CBS News

updated 18M ago

Holiday spending leaves many renters in the red

New Yorkers wind up in a $4,200 hole on average, while Seattle renters still have $1,700 after Santa is long gone

3H ago

Counting on a tax refund? You may owe this year, IRS says

The tax bill signed by Donald Trump last year may create an unwelcome surprise for some taxpayers in April

3H ago

Apple reveals new, bigger, pricier iPhones and Apple Watch

World's most valuable company unveiled three iPhones, an updated Apple Watch and a new "giveback" program

Sep 17

5 great new car deals you can get now

As the 2018 model year nears its end, big rebates and good lease deals are plentiful — here are some of the best

Jul 24

6 of the safest cars on the road

These are the latest new cars to earn the highest rating from the Insurance Institute for Highway Safety

Jun 21

Mark Zuckerberg grilled over data scandal

EU lawmakers question Mark Zuckerberg about Facebook's role in Cambridge Analytica scandal

May 22

Russian trolls' standout Facebook ads

Lawmakers released all 3,000-plus ads connected to the Russian Internet Agency, some of which ran through the summer of 2017

May 10