Updated December 18, 2018 08:52:44

Photo: Wall Street plummeted ahead of the widely-expected Fed rate hike on Thursday morning (AEDT). (AP: Richard Drew)

Volatility is becoming the new norm on stock markets these days, and this morning will be no exception.

The local share market is headed for a 1.5-per cent fall in early trade, according to ASX futures, following very weak leads from foreign markets.

Meanwhile, the Australian dollar was steady at 71.77 US cents at 7:20am (AEDT).

However, it slipped to 56.84 British pence and 63.24 Euro cents.

The 'crazy' Fed

Wall Street plunged overnight as investors grew increasingly worried the United States' central bank could be raising interest rates too quickly.

The Federal Reserve is widely expected to announce a rate hike on Wednesday afternoon (New York time) — its fourth this year, amid fears the US economy is slowing and could fall into recession within years.

Many economists see the Fed increasing rates next year, although at a slower pace.

US President Donald Trump's latest attack on the Fed's monetary policy did not help market sentiment.

Mr Trump tweeted: "It is incredible that with a very strong dollar and virtually no inflation … the Fed is even considering yet another interest rate hike. Take the Victory!"

A few hours later, White House trade adviser Peter Navarro amplified that theme, calling the Fed "crazy" for its plan to lift US interest rates further.

"We have zero inflation for all practical purposes, so … the only argument I'm hearing for the Fed to raise rates now, is that somehow they have to exert their independence from the White House," Mr Navarro said in an interview with CNBC.

Last week, official figures revealed the US consumer pride index rose 0.3 per cent in October, its weakest reading in eight months — resulting in the annual inflation rate drifting from 2.5 to 2.2 per cent.

The President has loudly and frequently berated the Fed and its chairman Jerome Powell for raising borrowing costs this year.

In an interview with Reuters last week, Mr Trump said he needed the flexibility of lower rates to support the broader US economy as he fights a growing trade battle against China, and potentially other countries.

Deeper into correction territory

At its worst, the industrial-skewed Dow Jones index fell nearly 600 points overnight, before slightly moderating its losses.

The Dow closed 508 points lower, down 2.1 per cent to 23,593.

The benchmark S&P 500 dropped 2.1 per cent to 2,546, erasing all the gains it made in the past 14 months — since October 2017.

Meanwhile, the tech-heavy Nasdaq index lost 2.3 per cent to 6,754. It was dragged down by Microsoft (-3pc) and the 'FAANG' stocks — Facebook (-1.3pc), Amazon (-4.5pc), Apple (-0.9pc), Netflix (-1.5pc) and Google (-2.5pc).

All three indices have fallen deeper into correction territory since their values peaked around September.

Goldman Sachs shares have sunk 2.8 per cent to a two-year low of $US167.88.

This was after Malaysia filed criminal charges against the US investment bank, and two of its former partners, in relation to the 1MDB money-laundering scandal.

Johnson & Johnson shares dropped by another 2.9 per cent, following reports the pharmaceutical giant knew for decades its baby powder products contained asbestos.

ABC/Reuters

Topics: business-economics-and-finance, markets, stockmarket, currency, australia

First posted December 18, 2018 07:32:25