Wall Street walloped by Fed fallout, shutdown fears

Wall Street got walloped again Thursday as traders continued to digest actions taken by the Federal Reserve Wednesday as well as a possible government shutdown following lack of support for President Trump’s border wall.

Much of Thursday’s bloodbath was a continuation of Wednesday’s carnage following the Fed’s decision to hike interest rates by a quarter of a percent and continue its plans to reduce the size of its $4 trillion balance sheet.

“There is no doubt that markets were expecting a bailout from the Fed — and threw a tantrum when they didn’t get it,” Brad McMillan, chief investment officer at Commonwealth Financial Network, said in a note Thursday.

Traders had hoped that weeks of market volatility and mounting pressure from Trump would force the Fed to pause on tightening.

“I’m doing deals, and I’m not being accommodated by the Fed,” Trump said last month in an interview with The Washington Post.

Instead, the Fed signaled that it would raise rates twice in 2019 — down from the three rate hikes previously projected — but not the enough to goose asset prices a little longer.

All major indices closed at fresh lows for the year as the tech-weighted Nasdaq shed 1.6 percent to close near bear-market territory — a dubious distinction marking a 20 percent drop below a previous high — due to the end of the easy-money era.

The S&P 500 and Dow Jones industrial average fell 1.6 percent and 2 percent, respectively, with the Dow down 679 points at its session low.

During a press conference Wednesday, Fed Chair Jerome Powell reiterated that the Fed would rely on economic data to inform future rate hikes.

“Broadly speaking, we don’t look at any one market. We look at a really big range of financial conditions,” Powell said, pointing to “strong” economic forecast for next year.

“From a macroeconomic standpoint, no one market is the single dominant indicator, and it really matters if changes are sustained over time,” he added.

“With the Fed stepping back, markets will be on their own in a way they have not been for decades,” McMillan said.

Meanwhile, as the Nasdaq flirts with bear market territory, both the S&P and Dow are well into correction territory, having fallen more than 10 percent from highs reached in September and October, respectively.

Selling accelerated Thursday afternoon when reports emerged that President Trump told House Speaker Paul Ryan that he would not sign the short-term spending bill approved by the Senate unless it had more funding for his proposed border wall — setting the stage for a partial government shutdown.

“Trump’s allies in the House can pound their fists on the table all they want, but it’s not going to get a wall,” Senate Minority Leader Chuck Schumer (D-NY) said earlier Thursday.

“We have to build a wall. It will get built. We’re going to complete it,” Trump said in a video posted to Twitter Thursday afternoon.