Financial markets faced significant downward pressure Friday as political turmoil in Washington pushed major indices toward their poorest weekly performance of the year. The tumult centered around complications with a bipartisan spending bill aimed at preventing a government shutdown, with President-elect Donald Trump’s involvement adding layers of complexity to the negotiations.
After initially opposing the spending measure based on consultation with Elon Musk, Trump later supported a modified version that ultimately failed to gain Republican backing. The President-elect’s attempt to incorporate debt ceiling provisions into the discussions has heightened Wall Street’s concerns about the future of Trump-era tax policies under the incoming Congress.
The political uncertainty has House Speaker Mike Johnson racing against time to broker an agreement before the midnight shutdown deadline. Adding to market anxieties, Trump escalated trade tensions by threatening new tariffs against the European Union, demanding increased purchases of U.S. oil and gas to address trade imbalances.
These developments triggered broad market declines, with S&P 500 futures indicating a 52-point drop at opening. The Dow Jones Industrial Average, fresh from breaking a nine-day losing streak, faced a projected 2,841-point decline, while Nasdaq futures pointed to a 300-point decrease.
Market volatility spiked significantly, with the CBOE’s VIX index reaching its highest level since August, suggesting anticipated daily S&P 500 fluctuations of approximately 1.6%, or 95 points, over the coming month.
In corporate news, pharmaceutical giant Eli Lilly saw its shares surge 9.6% in premarket trading, reaching $830.00, following disappointing trial results from competitor Novo Nordisk’s experimental anti-obesity drug. Novo Nordisk’s shares dropped 17.1% to $85.77 after their CagriSema treatment achieved 22.7% patient weight loss, below their 25% target.
FedEx shares rose 8.6% on news of plans to divest its freight trucking division, overshadowing underwhelming quarterly earnings. Conversely, Nike experienced a 3.6% decline despite beating second-quarter expectations, as investors reacted to conservative sales projections under new CEO Elliott Hill.
International markets reflected similar concerns, with European shares declining sharply following Trump’s tariff threats. The Stoxx 600 fell 1.51% in Frankfurt, while London’s FTSE 100 decreased by 0.96%. Asian markets also retreated, with Japan’s Nikkei 225 closing down 0.29% and the MSCI ex-Japan index dropping 1.2%.
The market turbulence follows the Federal Reserve’s final rate decision of the year, where hawkish messaging triggered initial market losses. The Fed’s outlook suggested caution regarding the uncertainty surrounding Trump’s political and economic agenda, both of which have become increasingly evident in recent days.
The Dow’s performance has been particularly noteworthy, declining more than 4% since Trump’s appearance at the New York Stock Exchange last week. This downturn reflects growing investor unease about political stability and its potential impact on economic policy implementation.
The convergence of shutdown concerns, trade tensions, and uncertain fiscal policy has created a challenging environment for investors, leading to broad-based market retreats and heightened volatility across major indices. As the shutdown deadline approaches, market participants remain focused on Washington’s ability to navigate these complex political dynamics.