1. Trump and the Fed: Does President Donald Trump have the legal authority to fire Federal Reserve Chairman Jerome Powell? US markets could be volatile during a shortened session Monday following reports that Trump has been consulting his advisers about just that question.
The US Treasury Department is already in damage control mode. Treasury Secretary Steven Mnuchin spent Sunday on the phone speaking with the chief executives of six of the country's largest banks in an effort to avoid another round of market whiplash.
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The CEOs of JPMorgan Chase (JPM), Wells Fargo (WFC), Goldman Sachs (GS), Morgan Stanley (MS), Bank of America (BAC) and Citi (C) each said they have "ample liquidity" to lend to consumers, businesses and perform other market operations, Treasury said in a statement Sunday evening.
Wall Street had a rough end to a brutal week on Friday, keeping it on track for its worst month since the financial crisis in 2008, and the phone calls were part of an effort to get ahead of further market jitters. A decision by Trump to fire his Fed chairman would likely exacerbate recent market volatility.
It was the second time over the weekend that Trump's finance chief tried to send a reassuring message to investors. A day earlier, Mnuchin tweeted that he had spoken with the president, relaying a message from Trump: "I never suggested firing Chairman Jay Powell, nor do I believe I have the right to do so."
2. US government closed for Christmas: The US Senate adjourned Saturday without coming to an agreement on a spending deal that would end a partial government shutdown.
The next chance the Senate has to pass an agreement will be Thursday, suggesting the third government shutdown of the year will last at least until then. Funding for roughly a quarter of the federal government has expired, including appropriations for the departments of Homeland Security, Housing and Urban Development and Justice.
Economists at Goldman Sachs said the economic hit from this closure would be smaller than previous shutdowns because funding had already been approved for agencies such as the Defense Department. But they warned of more turmoil next year.
"The confusion and disorder surrounding this week's spending debate suggest fiscal deadlines in 2019 — including the debt limit deadline, which we expect to fall between August to October — could be more disruptive than they have been since the 2011-2013 period," the economists wrote in a research note.
3. Global market overview: US stock futures were lower on Monday. Markets in New York will close at 1:00 p.m. ET, and be shut Tuesday for Christmas.
The Dow declined 414 points, or 1.8%, on Friday, capping off its deepest weekly plunge since October 2008. The Nasdaq plummeted 3%, officially closing in its first bear market since the Great Recession. The S&P 500 lost 2.1%.
Some international markets were closed for Christmas Eve. The Shanghai Composite added 0.4%, while London's FTSE 100 and Paris' CAC 40 both dropped roughly 0.9%.
4. Coming this week:
Monday — US markets close at 1 p.m. ET for Christmas Eve
Tuesday — US markets closed for Christmas
Wednesday — S&P Case-Shiller Home Price Index
Thursday — Consumer confidence for December and new home sales for November
Friday — Pending home sales for November