U.S. Stocks Slide After Rally

By Akane Otani Features Dow Jones Newswires

U.S. stocks swung in a turbulent session, sending the Dow Jones Industrial Average sliding as many as 350 points before it trimmed declines.

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Major indexes were little changed shortly after the opening bell, then sold off sharply before midday, with the losses at one point putting the blue-chip index on pace for one of its biggest one-day declines of the year.

As the selling accelerated, investors piled into assets that many consider havens -- sending gold and government bond prices higher.

Several traders said the market's churn appeared to start after ABC News reported that former national security adviser Michael Flynn was expected to testify that President Donald Trump "directed him to make contact with the Russians."

The Wall Street Journal hasn't independently confirmed the report.

As the report spread over social media, Mohit Bajaj, director of ETF trading solutions at brokerage WallachBeth Capital, noticed a pickup in trading volumes, particularly among S&P 500 and Treasurys futures.

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"People are just trying to protect themselves right now," Mr. Bajaj said as the stock selling accelerated. "I wouldn't be surprised if we saw a bounce later on," he added, noting that investors have often rushed in to scoop up stocks following sharp pullbacks this year.

The Dow industrials was recently down 66 points, or 0.3%, to 24205, off its session lows. The S&P 500 fell 0.3% and the Nasdaq Composite lost 0.6%.

Assets that many investors consider havens rallied Friday, with the yield on the benchmark 10-year U.S. Treasury note falling to 2.369%, according to Tradeweb, compared with 2.417% Thursday. Bond yields fall as prices rise.

Gold for December delivery rose 0.4% to $1,278.80 an ounce, backing off its session high.

Meanwhile, the U.S. dollar retreated, with the WSJ Dollar Index -- a measure of the dollar against a basket of 16 currencies -- falling sharply before paring declines.

The rise in political uncertainty "will create volatility for sure," said Brad Bechtel, managing director at Jefferies. "This will add an extra later of tension over the next several weeks."

The day's moves interrupted a rally that had brought major U.S. stock indexes to fresh highs this week.

Recent reports have shown consumer spending, home sales and business investment picking up, encouraging investors who have wondered whether an economy that has expanded for nine years could sustain its momentum.

Senate Republicans have also drawn closer to holding a vote on a tax bill that many analysts say could help boost corporate profits and keep the U.S. stock rally going. Reports on Friday that lawmakers had enough votes to pass the tax measure helped spur a recovery in stocks and the dollar following steep losses earlier in the session, some traders said.

Prospects of a tax overhaul had also helped lift bank stocks through much of the week.

The KBW Nasdaq Bank Index of large U.S. lenders fell 0.2% Friday but remained up 5.5% for the week, on pace for its biggest one-week advance of the year. Banks are expected to be among the biggest beneficiaries of a corporate tax cut, analysts said, while bond investors say Treasurys could suffer if tax cuts spur inflation that weakens demand for so-called haven assets.

"We've had one heck of a recovery, global trade being a lot more positive than we initially thought it would be and central banks still remaining pretty accommodative on the whole," said Tom Stringfellow, chief investment officer of Frost Investment Advisors.

The possibility that Congress will cut the corporate tax rates has helped provide additional fuel for U.S. stocks to chug higher, Mr. Stringfellow added, even as valuations have made many of the best performers in the stock market look pricey.

Ira Iosebashvili contributed to this article

Write to Akane Otani at akane.otani@wsj.com

(END) Dow Jones Newswires

December 01, 2017 15:07 ET (20:07 GMT)