“There are a lot of people searching for something else, some technical factor, or is it algorithmic trading, but I really think this is driven by rising uncertainty about the fundamentals: earnings, the economy and interest rates,” Mr. Donabedian mentioned.
Concerns about the White House’s response to Wall Street’s decline grew last week as Mr. Trump used Twitter to vent his frustration over the Fed’s decision to keep raising interest rates and sought guidance from aides about whether he could fire Mr. Powell. Despite the president’s frustrations, a number of White House officials have tried to reassure investors that Mr. Powell’s job is safe.
Traders have had their own concerns with Mr. Powell as well: At a news conference on Dec. 19 he used a word that is still ringing in market participants’ ears — “autopilot” — to describe the Fed’s likely approach to monetary tightening.
This suggested to investors that the Fed might not be willing to change its plans to further raise rates and drain money from the financial system, even if market turmoil persisted. Other Federal Reserve officials quickly moved to assuage those worries after the Dec. 19 announcement, but Mr. Donabedian said he expected anxiety about the Fed’s flexibility to persist until at least the end of the next meeting of the Federal Reserve Board on Jan. 30.
The partial shutdown of the federal government could also begin to wear on investors as they are forced to operate without official data that could help answer lingering questions about the health of the American economy. On Thursday, for instance, a Census Bureau report on new home sales was delayed because of the shutdown.
Investors got some data to digest on Thursday, and it was not encouraging. A report on consumer confidence by the Conference Board, a business group, showed Americans growing more pessimistic about economic conditions. In China, officials said industrial profits had declined in November for the first time in three years, a reminder that the growth of the nation’s economy, the world’s second-largest, continues to slow.
[Read more about the rally on Wednesday, which yielded a record gain for the Dow Jones industrial average.]