Dow ends lower amid fears of USA government shutdown

Traders work on the floor at the closing bell of the Dow Industrial Average at the New York Stock Exchange

Friday's plunge was fueled in part by technology losses. The S&P 500 is now down 7.7 per cent for the year and the Nasdaq is on the verge of a "bear market", which is a drop of 20 per cent from its peak this year.

Major indices had been up about 1 per cent prior to the Fed announcement.

Investors fear a recession is coming, and barring huge gains during the upcoming holiday period, when trading is usually quiet, this will be the worst December for stocks since the 1930s.

The Nasdaq Composite Index was down 195.41 points, or 2.99 per cent, to 6,332.99.

The market convulsion saw the Dow Jones Industrial Average fall by as much as 650 points at one point during midafternoon trading, with the S&P 500 down 2.4 percent and the Nasdaq dipping into bear market territory after a decline of 2.6 percent. Broad stock markets in the United States and Europe are on pace for the worst quarter since 2008, while the Dow finished its worst week since late 2008.

Equities hit their low for the day after U.S. House of Representatives Speaker Paul Ryan announced that President Donald Trump would not sign a temporary government funding resolution. In general, shutdowns don't affect the US economy or the market much unless they stretch out for several weeks, but investors don't like uncertainty, especially in Washington. "Fear about a US government shutdown is playing into the mix too".

The increasing likelihood of a partial government shutdown injected further pessimism into U.S. stock markets.

The Nasdaq's fall reflects a sharp move by investors away from what had been the market's leaders - the so-called FAANG group of five favorite technology and internet stocks.

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Furthermore, another drop in oil prices drove down energy stocks. The Dow Jones Small-Cap Value TSM Index closed at 8514.68 for a loss of -97.57 points or -1.13%.

The mood change has triggered a rush out of crowded trades, including massive long positions in US equities and the dollar and short positions in Treasuries.

Stocks usually end the year with a flourish, and December is usually the best month of the year for the market.

The S&P 500 fell 61 points, or 2.4 percent, to 2,445. The yield on the 10-year Treasury finished today nearly a half percent lower than its recent October peak. Heating oil fell 1 percent to $1.73 a gallon.

Bond prices fell. The yield on the 10-year Treasury note rose to 2.80 percent.

The S&P 500 fell 36 points, or 1.4 percent, to 2,471.

The Nasdaq is down 570.40 points, or 8.3 percent. Silver rose 0.3 percent to $14.87 an ounce and copper, which is considered an indicator of economic growth, fell 0.7 percent to $2.70 a pound.

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