Stocks set fall after Steven Mnuchin’s odd statement fails to calm markets

Stock markets sell off as Mnuchin move to soothe investor fears backfires

The Dow, which fell 2.9%, and the S&P 500 suffered their biggest Christmas Eve declines ever.

By Saleha Mohsin and Ros Krasny Treasury Secretary Steven Mnuchin called top executives from the six largest USA banks over the weekend, he said Sunday on Twitter, a move that followed heavy losses in the stock market last week and a partial federal government shutdown.

US markets reopen Wednesday. Investors are concerned that Trump may fire Federal Reserve Chairman Jerome Powell.

Mnuchin's statement on banks caused many to worry about banks, despite there having been no concerns about banks.

Mnuchin, who was reportedly vacationing in Cabo, released a statement that said the CEOs of six large banks confirmed they had enough liquidity for lending and market activities.

The secretary said none of the financial institutions had experienced "any clearance or margin issues" and "markets continue to function properly".

The major bank CEOs who spoke by phone with Mnuchin were "totally baffled" by the session, according to a person familiar with the call.

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"It was totally out of left field and an odd thing to do", the person said, describing the timing of the calls - on a Sunday ahead of Christmas before markets opened - as unusual.

But some of the bank executives and analysts were taken aback by the public nature of the Treasury statement reading out the calls - which placed the liquidity matter front and center, when in fact there is no real crisis at hand.

The calls - to banks such as Goldman Sachs, JP Morgan, and Wells Fargo - came hours before the markets were set to open on Monday, after suffering the worst week in a decade.

"This is the type of announcement that raises the question of whether Treasury sees problems that the rest of the market is missing", Cowen & Co. analyst Jaret Seiberg wrote in a note to clients. Nor did he consult the president on a separate decision to ask the nation's biggest banks about their ability to lend to consumers and other financial companies, another person said.

Mnuchin is also expected to hold a call with the President's Working Group on financial markets, which the treasury secretary chairs. the PWG includes the Federal Reserve's Board of Governors, the CFTC, and the SEC, and the key group of regulators are expected to discuss how to coordinate continued normal market operations.

With only a handful of trading days left in the year, the S&P 500 is down 7.1 per cent for the week, putting it on track for its worst December since the 1930s and leaving the benchmark 9.6 per cent lower for the year.

After another brutal day on Monday, the Dow is 18.8%, or 5,036 points, off its peak reached on September 20. Oil fell more than 6% on Monday to settle below $43 a barrel for the first time since June of 2017. Financing for about a quarter of federal government programs expired at midnight on Friday and the shutdown could continue to January 3. "They don't have a feel for the Market, they don't understand necessary Trade Wars or Strong Dollars or even Democrat Shutdowns over Borders".

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