Financial markets were volatile Monday morning. The Dow dipped below 22,000 at one point Monday morning and analysts feel the wild ride was instigated by Sunday remarks from Steve Mnuchin, United States Treasury Secretary.
The Dow recovered slightly as the morning went on but was still about 200 points below the start of the day. The Nasdaq and S&P 500 also lost ground Monday morning.
Mnuchin issued a statement Sunday that served to puzzle many analysts and investors. He said he made calls to the CEOs of America’s largest banks. Mnuchin explains the CEOs gave their word to him that each bank was healthy and possessed the financial capability to provide loans to businesses and consumers. The Treasury Secretary added that markets are properly functioning.
The CEOs who were part of conversations with Mnuchin reported being a little baffled by the context of the conversations. One executive involved with a call by Mnuchin described the talk as both puzzling and unnecessary.
The timing of the comments, just before markets opened on Sunday, was also seen as strange. Also, the executives were bewildered by the public Tweets made by Mnuchin.
Shares in major U.S. banks like J.P. Morgan, Bank of America, Wells Fargo, and others all lost ground Monday morning.
Jaret Seiberg is an analyst for Cowen & Co. Seiberg explains the actions of the Treasury Secretary causes a belief that perhaps the United States Treasury is aware of market issues that others are not aware of. Seiberg went on to say it is not viewed by industry insiders as a constructive move on the part of Mnuchin to have such conversations with major bank CEOs two days before Christmas.
Mnuchin is scheduled to take part in a conference call Monday to include the Federal Reserve Chairman and leading financial regulators in the country.
Friday completed the worst week experienced by the Dow since 2008 and the market is on pace to experience a December fall not seen since the Great Depression.
The market problems could be exacerbated by a government shutdown that will last at least until later in the week. Many fear the shutdown may not be ended until January. The government’s closure is not expected to have a direct effect on financial markets, however, the inability of the President and other members of the government to agree on basic issues has caused nervousness among investors.