Markets Set To Plunge At Open

A few hours ago, futures looked promising. Christmas Eve was set to be a recovery day for the markets. That changed quickly as Dow futures pivoted to a level which implies the market will open down 200 points. A year-end rally is looking less and less likely.

As the market turned, there are several culprits. First, some members of the Administration and Congressmen expect the partial government shutdown to last into early 2019. This will cut the spending power of tens of thousands of government workers, and disrupt some keep government services.

Treasury Secretary Mnuchin  made the decision to call CEOs of several banks to see whether he could count on them to provide liquidity to the markets–as if there is a reason there would not be any. He said he would create a “Plunge Protection Team.” Mnuchin’s office released the following:

Secretary Mnuchin conducted a series of calls today with the CEOs of the nations six largest banks: Brian Moynihan, Bank of America; Michael Corbat, Citi; David Solomon, Goldman Sachs; Jamie Dimon, JP Morgan Chase, James Gorman, Morgan Stanley; Tim Sloan, Wells Fargo. The CEOs confirmed that they have ample liquidity available for lending to consumer, business markets, and all other market operations. He also confirmed that they have not experienced any clearance or margin issues and that the markets continue to function properly.

Tomorrow, the Secretary will convene a call with the President’s Working Group on financial markets, which he chairs. This includes the Board of Governors of the Federal Reserve System, the Securities and Exchange Commission, and the Commodities Futures Trading Commission. He has also invited the office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation to participate as well. These key regulators will discuss coordination efforts to assure normal market operations.