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Dow ends 2.0% lower amid fears of government shutdown

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Dow Jones after market close

Without a decent rally, this could be the worst December since 1931.

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.

The index is now down more than 10 percent for December, putting it on track for its worst monthly loss in nearly a decade.

Benchmark 10-year Treasury notes last rose 2/32 in price to yield 2.783 percent, from 2.789 percent late on Thursday. In general, shutdowns don't affect the USA economy or the market much unless they stretch out for several weeks, but investors don't like uncertainty, especially in Washington. The Nasdaq tumbled 195.41 points to 6,332.99, or 21.9 per cent below its peak of 8,109.69 on August 29.

The market swoon is coming even as the USA economy is on track to expand this year at the fastest pace in more than a decade.

The possibility of a partial shutdown of the federal government also loomed over the market on Thursday, as funding for the government runs out at midnight Friday.

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.

Among other threats: the trade dispute between the USA and China, and rising US interest rates, which act as a brake on economic growth by making it more expensive for businesses and individuals to borrow money. The Dow is off 10 percent for December, and the Nasdaq is down more than 19 percent since August 29.

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"I think clearly you have a situation here where the market has overreacted to the Fed's comments, and you see programmed trading taking over", he said in an interview with Fox Business Network.

After years of gains, U.S. investors are fleeing stocks, anxious about a range of factors likely to hit corporate profits, including slowing economic growth domestically and overseas.

The Nasdaq composite declined 108.42 points, or 1.6 percent, to 6,528.41.

Major U.S. indexes are now 16 to 26 percent below the peaks they reached in the summer and early fall. And the Federal Reserve added to those concerns this week by signaling that its rate-increase plan will continue into 2019 despite downgrading its economic growth forecast. The S&P 500 also dropped 1.79 percent, while the Nasdaq Composite slipped 1.63 percent to enter bear market territory.

Oil prices continued to retreat.

In France, the CAC 40 lost 1.8 percent and Germany's DAX fell 1.4 percent.

As recently as October, yields had been at a seven-year high of 3.261 percent.

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