The reasons for pessimism are well known: the withdrawal of monetary stimulus led by the Federal Reserve; the simmering US-China trade war; and signs of a regime change in markets as a long period of calm gives way to a surge in volatility.
The sell-off accelerated after Jerome Powell, chairman of the central bank, explained the Fed's decision to lower its growth forecast for next year after the two-day policy meeting... The bond market has correctly predicted several previous USA recessions by buying long-term bonds and sending yields down.
The Dow Jones industrial average closed down more than 350 points, about 1.5 percent, following a similar trend to every Fed decision Powell has announced since February.
Since inflation has remained moderate, that allows the Fed "to be patient" in raising rates moving forward. "The bottom line is market participants are more concerned about the economic outlook than the Fed is".
"Despite the Fed hanging onto its positive outlook, we do know that the Fed will only go forth and hike if data coming out of the USA improves", he wrote. This marks the fastest pace of rate hikes since they ended quantitative easing in 2015 and implemented a monetary policy of quantitative normalization.
That move sent the yield on 10-year Treasury notes lower to 2.756 percent from a recent high of 3.238 percent in November. It will mean higher borrowing costs for many consumers and businesses.
After early gains, bond prices headed lower.
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Interest rate futures show traders are now betting the Fed won't raise rates at all next year. That's a substantial move for that benchmark lending rate. In a Fox Business interview, Mnuchin said that he believed markets were disappointed in Powell's comments at a news conference following the meeting.
In its official statement, the Fed said increases to its benchmark rate would help the U.S. economy sustain its expansion, keep the unemployment rate low and inflation near 2%.
On the issue of whether the current trade negotiations between the USA and China will be able to reach a deal to avoid more penalty tariffs, Mnuchin expressed cautious optimism.
Opening losses for the heavyweight mining and financial sectors weighed on the market, while energy and healthcare stocks were also down early.
The dollar initially gained as the Fed was seen as more hawkish but it lost steam against other safe-haven currencies, such as the yen.
By diminishing its bond market holdings each month, the Fed puts further upward pressure on interest rates, something Trump explicitly requested them this week to stop.
It is now forecasting USA economic growth of 2.3% next year, down from an earlier estimate of 2.5%, and also sees the unemployment rate rising slightly more quickly. The Standard & Poor's 500 index shed 1.54 percent, while the Nasdaq dropped 2.17 percent.
"Given the stock market declines and negative worldwide economic news - recognised in the statement - this still points to quite a bit of confidence at the Fed in the ability of the U.S. economy to withstand a few more rate hikes", said Brian Coulton, chief economist at Fitch Ratings.
MSCI's broadest index of Asia-Pacific shares outside Japan dropped 1.1 percent, with Australian shares also declining 1.3 percent to a two-year closing low.