US stock markets fell sharply on Wednesday, erasing all gains for the year and muddying one of President Donald Trump's favourite talking points two weeks before the midterm elections.

The technology-heavy Nasdaq fell 4.4 per cent, its worst one-day drop since the financial crisis. The index has slid more than 12 per cent since the end of August. The Standard & Poor's 500-stock index, which tracks a broader group of U.S. companies, has lost $2 trillion in value since late September, down 9 percent. The Dow Jones industrial average, meanwhile, lost 608 points Wednesday and is down 8.3 percent in the past three weeks.

The financial swoon threatens to undermine a market rise for which Mr Trump has frequently claimed credit and to highlight controversial aspects of Trump's agenda, including tariffs many companies are blaming for their struggles and a tax cut that polls suggest the public views as inadequately helpful for the middle class.

Mr Trump has increasingly looked to shift focus away from economic indicators he once touted and towards immigration and other issues - and assign blame elsewhere for any economic setbacks.

He has pummelled the Federal Reserve, alleging higher interest rates pose the biggest risk to growth - even musing he might have made a mistake when he nominated Jerome H Powell as the nation's top central banker less than a year ago. It is unusual for a president to attack the central bank - the Fed aims to maintain independence from the White House to avoid politics from tainting its economic decisions.

Mr Trump has also promised a 10 per cent middle-class tax cut, a proposal that caught his aides by surprise and that lawmakers said was exceedingly unlikely in the near future.

In recent days, Mr Trump has suggested he could mobilise the military to protect the southern border from a caravan of migrants, but he has said little about the recent stock-market movement.

"The president is very good at manipulating the narrative and getting people - either through traditional media or social media - to focus on what he wants them to focus on," said Brian Gardner, managing director at Keefe, Bruyette & Woods, an investment bank.

World news in pictures Show all 50 1 /50 World news in pictures World news in pictures 14 September 2020 Japan's Prime Minister Shinzo Abe, Chief Cabinet Secretary Yoshihide Suga, former Defense Minister Shigeru Ishiba and former Foreign Minister Fumio Kishida celebrate after Suga was elected as new head of the ruling party at the Liberal Democratic Party's leadership election in Tokyo Reuters World news in pictures 13 September 2020 A man stands behind a burning barricade during the fifth straight day of protests against police brutality in Bogota AFP via Getty World news in pictures 12 September 2020 Police officers block and detain protesters during an opposition rally to protest the official presidential election results in Minsk, Belarus. Daily protests calling for the authoritarian president's resignation are now in their second month AP World news in pictures 11 September 2020 Members of 'Omnium Cultural' celebrate the 20th 'Festa per la llibertat' ('Fiesta for the freedom') to mark the Day of Catalonia in Barcelona. Omnion Cultural fights for the independence of Catalonia EPA World news in pictures 10 September 2020 The Moria refugee camp, two days after Greece's biggest migrant camp, was destroyed by fire. Thousands of asylum seekers on the island of Lesbos are now homeless AFP via Getty World news in pictures 9 September 2020 Pope Francis takes off his face mask as he arrives by car to hold a limited public audience at the San Damaso courtyard in The Vatican AFP via Getty World news in pictures 8 September 2020 A home is engulfed in flames during the "Creek Fire" in the Tollhouse area of California AFP via Getty World news in pictures 7 September 2020 A couple take photos along a sea wall of the waves brought by Typhoon Haishen in the eastern port city of Sokcho AFP via Getty World news in pictures 6 September 2020 Novak Djokovic and a tournament official tends to a linesperson who was struck with a ball by Djokovic during his match against Pablo Carreno Busta at the US Open USA Today Sports/Reuters World news in pictures 5 September 2020 Protesters confront police at the Shrine of Remembrance in Melbourne, Australia, during an anti-lockdown rally AFP via Getty World news in pictures 4 September 2020 A woman looks on from a rooftop as rescue workers dig through the rubble of a damaged building in Beirut. 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Masks, which were already compulsory on public transport, in enclosed public spaces, and outdoors in Paris in certain high-congestion areas around tourist sites, were made mandatory outdoors citywide on August 28 to fight the rising coronavirus infections AFP via Getty World news in pictures 28 August 2020 Japanese Prime Minister Shinzo Abe bows to the national flag at the start of a press conference at the prime minister official residence in Tokyo. Abe announced he will resign over health problems, in a bombshell development that kicks off a leadership contest in the world's third-largest economy AFP via Getty World news in pictures 27 August 2020 Residents take cover behind a tree trunk from rubber bullets fired by South African Police Service (SAPS) in Eldorado Park, near Johannesburg, during a protest by community members after a 16-year old boy was reported dead AFP via Getty World news in pictures 26 August 2020 People scatter rose petals on a statue of Mother Teresa marking her 110th birth anniversary in Ahmedabad AFP via Getty World news in pictures 25 August 2020 An aerial view shows beach-goers standing on salt formations in the Dead Sea near Ein Bokeq, Israel Reuters World news in pictures 24 August 2020 Health workers use a fingertip pulse oximeter and check the body temperature of a fisherwoman inside the Dharavi slum during a door-to-door Covid-19 coronavirus screening in Mumbai AFP via Getty World news in pictures 23 August 2020 People carry an idol of the Hindu god Ganesh, the deity of prosperity, to immerse it off the coast of the Arabian sea during the Ganesh Chaturthi festival in Mumbai, India Reuters World news in pictures 22 August 2020 Firefighters watch as flames from the LNU Lightning Complex fires approach a home in Napa County, California AP World news in pictures 21 August 2020 Members of the Israeli security forces arrest a Palestinian demonstrator during a rally to protest against Israel's plan to annex parts of the occupied West Bank AFP via Getty World news in pictures 20 August 2020 A man pushes his bicycle through a deserted road after prohibitory orders were imposed by district officials for a week to contain the spread of the Covid-19 in Kathmandu AFP via Getty World news in pictures 19 August 2020 A car burns while parked at a residence in Vacaville, California. Dozens of fires are burning out of control throughout Northern California as fire resources are spread thin AFP via Getty World news in pictures 18 August 2020 Students use their mobile phones as flashlights at an anti-government rally at Mahidol University in Nakhon Pathom. Thailand has seen near-daily protests in recent weeks by students demanding the resignation of Prime Minister Prayut Chan-O-Cha AFP via Getty World news in pictures 17 August 2020 Members of the Kayapo tribe block the BR163 highway during a protest outside Novo Progresso in Para state, Brazil. Indigenous protesters blocked a major transamazonian highway to protest against the lack of governmental support during the COVID-19 novel coronavirus pandemic and illegal deforestation in and around their territories AFP via Getty World news in pictures 16 August 2020 Lightning forks over the San Francisco-Oakland Bay Bridge as a storm passes over Oakland AP World news in pictures 15 August 2020 Belarus opposition supporters gather near the Pushkinskaya metro station where Alexander Taraikovsky, a 34-year-old protester died on August 10, during their protest rally in central Minsk AFP via Getty World news in pictures 14 August 2020 AlphaTauri's driver Daniil Kvyat takes part in the second practice session at the Circuit de Catalunya in Montmelo near Barcelona ahead of the Spanish F1 Grand Prix AFP via Getty World news in pictures 13 August 2020 Soldiers of the Brazilian Armed Forces during a disinfection of the Christ The Redeemer statue at the Corcovado mountain prior to the opening of the touristic attraction in Rio AFP via Getty World news in pictures 12 August 2020 Young elephant bulls tussle playfully on World Elephant Day at the Amboseli National Park in Kenya AFP via Getty World news in pictures 11 August 2020 French Prime Minister Jean Castex is helped by a member of staff to put a protective suit on prior to his visit at the CHU hospital in Montpellier AFP via Getty World news in pictures 10 August 2020 Locals harvest their potatoes as Mount Sinabung spews volcanic ash in Karo, North Sumatra province, Indonesia Antara Foto/Reuters World news in pictures 9 August 2020 Doves fly over the Peace Statue at Nagasaki Peace Park during the memorial ceremony held for the 75th anniversary of the atomic bombing EPA World news in pictures 8 August 2020 Anti-government protesters try to remove concrete wall that installed by security forces to prevent protesters reaching the Parliament square, during a protest against the political elites and the government after this week's deadly explosion in Beirut AP World news in pictures 7 August 2020 A protester throws a stone towards Israeli forces in the village of Turmus Aya, north of Ramallah in the occupied West Bank, following a march by Palestinians against the building of Israeli settlements AFP via Getty World news in pictures 6 August 2020 A woman yells as soldiers block a road for French President Emmanuel Macron's visit the Gemmayzeh neighborhood. 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Muslim pilgrims converged today on Saudi Arabia's Mount Arafat for the climax of this year's hajj, the smallest in modern times and a sharp contrast to the massive crowds of previous years Saudi Ministry of Media/AFP World news in pictures 30 July 2020 The Mars 2020 Perseverance mission lifts off at the Kennedy Space Centre in Florida. The mission is part of the USA's largest moon to Mars exploration. Nasa will attempt to establish a sustained human presence on and around the moon by 2028 through their Artemis programme EPA World news in pictures 29 July 2020 A woman refreshes herself in a outdoor pool in summer temperatures in Ehingen, Germany dpa via AP World news in pictures 28 July 2020 Malaysia's former prime minister Najib Razak speaks to the media after he was found guilty in his corruption trial in Kuala Lumpur AFP via Getty World news in pictures 27 July 2020 North Korean leader Kim Jong Un poses for a photograph after conferring commemorative pistols to leading commanding officers of the armed forces on the 67th anniversary of the "Day of Victory in the Great Fatherland Liberation War". Which marks the signing of the Korean War armistice KCNA via Reuters

Mr Trump's focus on immigration and his surprise proposal for a middle-class tax cut come as the strong economy exhibits signs of strain.

Beyond the slumping market, rates on 30-year mortgages are climbing, with many loans now eclipsing 5 per cent. Higher interest rates can limit borrowing, slowing home sales and the economy. And a range of businesses - including firms that Trump has praised, such as Harley-Davidson and United Technologies - is warning that the White House's trade strategy could cost them millions of dollars in lost revenue.

Forty-eight S&P 500 companies mentioned "tariffs" during calls with analysts in recent days, many warning that they threaten to cause a drag on the economy.

Mr Trump has dismissed complaints from chief executives about the White House's trade policy, telling The Wall Street Journal that overpaid executives will not take responsibility for their own bad decisions.

"I have created such an incredible economy," Mr Trump said in Montana last week. "I have created so many jobs."

Mr Trump said repeatedly during the summer that the United States was experiencing the greatest economy in its history, largely citing the low unemployment rate. In an interview earlier this week with The Wall Street Journal, he falsely denied imposing any tariffs on imports, even though he has implemented numerous tariffs against a range of countries this year.

His comments to the Journal directly contradict his Twitter post from a few hours earlier, in which he said the tariffs he had launched were bringing billions of dollars into the government's coffers. Trump has mis-characterised the way tariffs work, suggesting they are paid by other countries rather than by US companies that import the products - often passing those costs to U.S. consumers.

White House officials have denied that Mr Trump's recent behaviour is driven by concerns about a weakening economy, saying the new tax plan, despite its surprise roll-out, is meant to build on last year's tax law and help the middle class. And a number of senior officials have said the fundamentals of the economy remain strong, and the White House has an upbeat outlook for next year.

"Our job is to focus on what the economic numbers say, and the numbers are very solid right now," Kevin Hassett, chairman of the White House Council of Economic Advisers, said in an interview. "If your policies have produced the numbers we are observing, then you shouldn't duck."

Douglas Holtz-Eakin, a Republican economist, said the new tax-cut announcement struck many as an act of knee-jerk desperation.

"I don't think it helps to have the president invent a tax cut," he said. "That looks panicky. That hurts the larger effort. That wasn't the White House. That was him."

Job growth during Mr Trump's presidency is roughly comparable to the last four years of the Obama administration, though the jobless rate is lower and economic growth has picked up. Economists are mixed on whether this is sustainable, with some cautioning the gains from tax cuts and higher federal spending are temporary.

UK news in pictures Show all 50 1 /50 UK news in pictures UK news in pictures 18 September 2020 A model presents a creation during the Bora Aksu catwalk show at London Fashion Week 2020 Reuters UK news in pictures 17 September 2020 World kickboxing champion Carl Thomas during his attempt to run a marathon while pulling a plane at Elvington Airfield near York. The attempt is raising funds for Ollie's Army Battling Against Battens, an organisation campaigning to raise GBP 250,000 to fund a clinical trial aimed at saving the sight of children with CNL2 Batten Disease PA UK news in pictures 16 September 2020 Labour deputy leader Angela Rayner speaking during Prime Minister's Questions UK Parliament/AFP/Getty UK news in pictures 15 September 2020 People enjoying the autumn sunshine as they punt along the River Cam in Cambridge PA UK news in pictures 14 September 2020 Early morning light bathes the skyscrapers of the City of London, at the start of a week in which the UK is expected to bask in temperatures of more than 30 degrees PA UK news in pictures 13 September 2020 England celebrate after they dismissed Australia's Alex Carey to win the second ODI match of the series at Emirates Old Trafford, Manchester PA UK news in pictures 12 September 2020 Protesters outside BBC Broadcasting House in central London, as marches and rallies form across the country calling for a 15% pay rise for NHS workers and an increase in NHS funding PA UK news in pictures 11 September 2020 An empty migrant dinghy floats off the beach at St Margaret's Bay after the occupants landed from France in Dover Getty UK news in pictures 10 September 2020 A view of small boats thought to be used in migrant crossings across the Channel at a storage facility in Dover, Kent PA UK news in pictures 9 September 2020 EU's chief negotiator Michel Barnier, left, arriving from the Eurostar with EU Ambassador to the UK, Portuguese diplomat Joao Vale de Almeida at St Pancras International railway station, London, for the latest round of the negotiations on a free trade deal between the EU and the UK PA UK news in pictures 8 September 2020 Dawn over Coquet Island, a small island off Amble on the Northumberland coast PA UK news in pictures 7 September 2020 A hovercraft arrives to Southsea, Hampshire from the Isle of Wight PA UK news in pictures 6 September 2020 Forensics officers near the scene of multiple reported stabbings in Birmingham Reuters UK news in pictures 5 September 2020 Anti-migrant protesters demonstrate in Dover against immigration and the journeys made by refugees crossing the Channel to Kent PA UK news in pictures 4 September 2020 Activists take part in a demonstration against the HS2 hi-speed rail line outside the Department of Transport AFP via Getty UK news in pictures 3 September 2020 Peter Baker, who plays Trigger in the musical version of Only Fools and Horses, sweeps the stage of the Theatre Royal Haymarket in London, after observing a 15 minute silence to show solidarity with those in the theatre industry that have lost their jobs due to the coronavirus pandemic PA UK news in pictures 2 September 2020 Kadie Lane, right, 11, and Brooke Howourth, 11, hug on their walk to Marden Bridge Middle School in Whitley Bay, Tyne and Wear, for their first day of term, as schools in England reopen to pupils following the coronavirus lockdown PA UK news in pictures 1 September 2020 Extinction Rebellion protesters sitting outside The Houses of Parliament in Westminster, London PA UK news in pictures 31 August Surfers at Long Sands Beach, Tynemouth PA UK news in pictures 30 August Black Lives Matter protesters march through Notting Hill in London in the first Million People March EPA UK news in pictures 29 August A protester reacts as she demonstrates against the lockdown and use of face masks, amid the coronavirus disease outbreak, outside Downing Street in London Reuters UK news in pictures 28 August Caribbean soca dancers display their costumes as they promote the first ever digital Notting Hill Carnival, following the cancellation of the normal Carnival festivities due to the continued spread of the coronavirus disease, in London Reuters UK news in pictures 27 August Father and son team Chris and Sam Milford from historic building conservation specialists WallWalkers begin restoration work on the spire of Norwich Cathedral, which stands at over 312ft high. The first known spire was completed in 1297 PA UK news in pictures 26 August Giant waves at Seaham in County Durham, as the bad weather continues PA UK news in pictures 25 August An assistant at the Wallace Monument cleans the case which houses the William Wallace sword in the Hall of Arms room at the monument near Stirling as they prepare to re-open PA UK news in pictures 24 August Restored World War Two landing craft LCT 7074 is transported from from the Naval Base in Portsmouth to its final resting place at the D-Day Story at Southsea PA UK news in pictures 23 August Jenny Nguyen and Tony Cao, from Vietnam, pose for wedding photos on Tower Bridge in London, as it remains closed to vehicles after it was stuck open on Saturday due to a "mechanical fault". The landmark's Twitter account confirmed only pedestrians and cyclists could use it on Sunday morning PA UK news in pictures 22 August England's Zak Crawley hit 267, joining the exclusive Double Hundred club, on day two of the Third Test match against Pakistan at the Ageas Bowl, Southampton PA UK news in pictures 21 August Harri Teale gathers lavender during the annual harvest on the Wolds Way Lavender farm near Malton in North Yorkshire PA UK news in pictures 20 August Parents and a student react after checking GCSE results at Ark Academy in London Reuters UK news in pictures 19 August Tate Modern workers hold a strike outside the gallery in London, to protest the institution's announcement that it would cut more than 300 jobs from its commercial arm, Tate Enterprises PA UK news in pictures 18 August Two rescued brown bear cubs, Mish (left) and Lucy, cool off in a pool after arriving at their new home with the wildlife conservation charity Wildwood Trust in Herne Bay, Kent. The orphaned pair, who have been living in a temporary home in Belgium since they were found abandoned and alone in a snowdrift in the Albanian mountains, will be acclimatised to their new life in the country before moving to a permanent home PA UK news in pictures 17 August A level students celebrate outside the Department for Education in London after it was confirmed that candidates in England will be given grades estimated by their teachers, rather than by an algorithm. The government U-turn comes just days after Education Secretary Gavin Williamson vowed there would be "no U-turn, no change. PA UK news in pictures 16 August Wasp players take a knee as Northampton Saints stand prior to kick-off in their Premiership match at Franklin's Gardens PA UK news in pictures 15 August Piper Colour Sergeant Lil Bahadur Gurung attends the VJ Day National Remembrance event, held at the National Memorial Arboretum in Staffordshire, Britain Reuters UK news in pictures 14 August People including students hold placards on Whitehall outside Downing Street as they protest against the downgrading of A-level results. The government faced criticism after education officials downgraded more than a third of pupils' final grades in a system devised after the coronavirus pandemic led to cancelled exams yes AFP via Getty UK news in pictures 13 August Benita Stipp (centre) and Mimi Ferguson (left) react as students at Norwich School receive their A-Level results PA UK news in pictures 12 August 2020 A train derailment near Stonehaven has left three people dead. Driver Brett McCullough, conductor Donald Dinnie, and a passenger were killed when the 6.38am Aberdeen to Glasgow Queen Street service crashed amid heavy rain and flooding BBC UK news in pictures 11 August 2020 A woman hydrates in the sun after open water swimming at the West Reservoir Centre in north London Tolga Akmen/AFP via Getty UK news in pictures 10 August 2020 Prime Minister Boris Johnson takes part in an archery session as he visits Premier Education Summer Camp at Sacred Heart of Mary Girls' in Upminster Reuters UK news in pictures 9 August 2020 People cycle through Cambridge as the heatwave continues in Britain EPA UK news in pictures 8 August 2020 Healthcare workers take part in a protest in London over pay conditions in the NHS Getty UK news in pictures 7 August 2020 Emergency services make their way along the seafront on Bournemouth beach in Dorset on one of the hottest days of the year PA UK news in pictures 6 August 2020 Alison Murphy poses for a picture by husband Peter as she walks through a field of sunflowers in Altrincham, Cheshire PA UK news in pictures 5 August 2020 Pakistan's Abid Ali being bowled by England's Jofra Archer during day one of the First Test match at the Emirates Old Trafford, Manchester PA UK news in pictures 4 August 2020 The 'Timbuktu tumblers' from Kenya perform their balancing act on the Southsea waterfront as Zippos Circus reopens in Portsmouth Rex UK news in pictures 3 August 2020 Pelicans interact with a visitor in St James's Park in London PA UK news in pictures 2 August 2020 Lewis Hamilton drives with a puncture towards the finish line to win the Formula One British Grand Prix at Silverstone POOL/AFP via Getty UK news in pictures 1 August 2020 Arsenal's Pierre-Emerick Aubameyang celebrates with the trophy and teammates after winning the FA Cup, as play resumes behind closed doors following the outbreak of the coronavirus disease Pool via Reuters UK news in pictures 31 July 2020 People enjoy the sunny weather at a Bournemouth Beach Reuters

"It's easy to say [Trump is] trying to set the Fed up for the fall here, but a lot of people were warning that the president was taking a risk and Republicans were taking a risk by putting forward a bunch of fiscal stimulus at this point the business cycle," said James Pethokoukis, a policy analyst at the American Enterprise Institute.

New-home sales sank for the fourth straight month in September, reflecting the impact of mortgage rates that now top 5 per cent for many borrowers.

Sales of new single-family homes last month fell 5.5 per cent from the previous month, to a seasonally adjusted annual rate of 553,000, according to a government report. September's sales volume was more than 13 per cent lower than the same month one year earlier, and figures for June, July and August were also revised down.

Though the strong labour market is likely to support demand, some economists are beginning to worry about collateral damage from a housing downturn.

"The economy cannot grow at a sustainable 3 per cent pace for long if new-home sales continue to tumble," warned economist Chris Rupkey of MUFG Union Bank.

Many executives had hoped trade fights with China and other countries would be resolved swiftly, but it appears a number of disagreements will drag into at least next year.

The $260bn in tariffs Mr Trump unleashed on Beijing took effect in this year's third quarter, covering roughly half of what the United States buys from China.

American companies have warned for months that Trump's trade war with China and other nations could wrench their bottom lines, and now they are quantifying that damage in dour earnings reports.

Ford recently reported levies on metals will shave $1bn off the auto-maker's profits, while consumer-goods giant Honeywell said it expects to absorb "hundred of millions of dollars" in new duty-related costs.

Minnesota manufacturer 3M projected a loss next year of $100m, blaming "tariff head winds." Caterpillar shares took the sharpest dive in seven years after the tractor maker said the commercial battle between the world's two largest economies was driving up the price of steel.

Walmart cautioned that prices could swell because a third of the products on its shelves arrive from outside the United States - and many are labelled "Made in China."

United Technologies, which once lauded Mr Trump for saving its Carrier subsidiary's Indianapolis furnace factory, has changed its public stance on the president's economic moves, saying his flurry of levies will sting to the tune of $200 million.

And Harley-Davidson said this week the duties will zap $20 million out of its wallet this year and that retaliatory tariffs from the European Union could deal an additional $45m blow.

More than a third of the 110 S&P 500 companies that have shared third-quarter earnings since Tuesday have discussed the impact of higher border taxes during their conference calls with analysts, according to the investor research group FactSet.

Some companies have appealed directly to the administration, urging Mr Trump to lower the trade barriers before the burden falls on American shoppers.

"As the largest retailer in the United States and a major buyer of US manufactured goods, we are very concerned about the impacts these tariffs would have on our business, our customers, our suppliers and the US economy as a whole," Walmart wrote in a late-September letter to US Trade Representative Robert Lighthizer.

Several economic factors could converge in the coming weeks to put more pressure on growth, including a decision from Mr Powell about whether to again raise a key borrowing rate in December and an expected fight over federal spending levels. The results of those could give investors and households a new perspective on Trump's stewardship of an economy that looks much different than it did one year ago.

Offering one of the last snapshots of the economy before the midterm elections, the government is scheduled to release economic data that measures how much the economy grew from July to September. Analysts diverge strongly on how strong or weak the report will be.

Additional reporting by David J Lynch