MARKET SNAPSHOT: U.S. Stocks Tumble As Concerns Over Trump Grow
Flight to quality pushes up gold, yen and Treasurys
U.S. stocks sold off in early trade Wednesday as renewed political turmoil in Washington cast doubt on whether President Donald Trump can push forward with a pro-growth agenda that had helped drive stocks to repeat records.
The main indexes were on track for their largest daily declines in nearly two months.
The continuing political uncertainty sent the S&P 500 index down 25 points, or 1%, to 2,376, with 10 of its 11 main sectors trading lower. Financials, which had been among the biggest beneficiaries of Trump's market-friendly agenda, were the biggest losers, down 1%.
The Dow Jones Industrial Average dropped 225 points, or 1.1%, to 20,757. Of the 30 blue-chip companies, 27 were trading lower. Goldman Sachs Group Inc.(GS) and J.P. Morgan Chase & Co(JPM), were leading losses, down more than 2%.
The Nasdaq Composite Index , which closed at a record for a second session in a row on Tuesday, declined 72 points, or 1.2%, to 6,097.
"Today's market action is a quintessential risk-off day, with investors getting out of risky assets such as equities and piling into Treasurys and gold," said Michael Antonelli, equity sales trader at Robert W. Baird & Co.
"The big sell-off in banking stocks suggests that the market now believes that no tax or regulatory reforms are coming," Antonelli said.
Read:How to tell if the tide has finally turned on this Trump rally (http://www.marketwatch.com/story/how-to-tell-if-the-tide-has-finally-turned-on-this-trump-rally-2017-05-17)
Weakness for global equities came after the New York Times reported that Trump in February asked then-Federal Bureau of Investigation Director James Comey to stop his investigation (http://www.marketwatch.com/story/trump-asked-comey-to-drop-flynn-investigation-report-2017-05-16) into former National Security Adviser Michael Flynn.
The report also prompted some House Republicans to call for a further investigation and for the FBI to hand over documents related to communications between the president and Comey, whom Trump fired earlier this month.
See:Sen. McCain says Trump's problems are 'reaching Watergate size' (http://www.marketwatch.com/story/mccain-says-trumps-problems-reaching-watergate-size-2017-05-17)
The CBOE Volatility Index, which measures implied volatility on the S&P 500, jumped 20% to 12.78, on pace for its biggest daily climb in eight months.
Perceived haven assets rose, with gold up $18.50, or 1.5% (http://www.marketwatch.com/story/gold-rises-and-tries-for-fresh-2-week-high-as-trump-worries-spark-haven-demand-2017-05-17), to $1,254.9 an ounce. Demand for U.S. government bonds pushed the yield on the 10-year Treasury note to 2.26% (http://www.marketwatch.com/story/treasury-yields-sink-as-trump-fbi-controversy-intensifies-2017-05-17), a three-week low. The Japanese yen , another asset investors typically turn to in time of stress, rose against the dollar, with the greenback buying Yen111.79, compared with Yen113.12 late Tuesday.
The dollar also slumped against other major rivals (http://www.marketwatch.com/story/asian-markets-mostly-down-as-dollar-continues-to-fall-2017-05-16), with the ICE Dollar Index falling to its lowest level since the day after the U.S. presidential election in November. It hit an intraday low of 97.86.
"Given that the 'Trump trade' is one of the main reasons the market has been able to break records of late, it is understandable that the scandal engulfing the U.S. government would be of some concern to investors," said Connor Campbell, financial analyst at Spreadex, in a note.
"That's because this crisis will likely prevent Trump from pushing through the very policies--like his huge infrastructure plans and generous tax cuts--that fueled much of the recent rally any time soon, undermining the basis for the current highs," he added.
The probability of a Trump impeachment has gone up after the recent events, analysts noted, with bookmaker Paddy Power's odds reflecting a 33% chance it could happen. An impeachment requires the backing of two-thirds of the Republican-controlled Senate.
Read:Trump impeachment? Bookies odds increasingly point to an early exit (http://www.marketwatch.com/story/trump-impeachment-odds-increasingly-point-to-an-early-exit-2017-05-17)
Also read:Here's why stocks could rally if Trump heads for the exit (http://www.marketwatch.com/story/heres-why-stocks-could-rally-if-trump-heads-for-the-exit-2017-05-12)
(http://www.marketwatch.com/story/heres-why-stocks-could-rally-if-trump-heads-for-the-exit-2017-05-12) (http://www.marketwatch.com/story/heres-why-stocks-could-rally-if-trump-heads-for-the-exit-2017-05-12)Earnings news: Retailer Target Corp.(TGT) rose 3.4% after posting adjusted earnings that easily outstripped Wall Street's expectations (http://www.marketwatch.com/story/target-shares-climb-6-premarket-after-results-exceed-expectations-2017-05-17).
After the market closes, Cisco Systems Inc.(CSCO) earnings are on deck. Cisco shares have risen 2.5% so far this week, rising alongside other cybersecurity and antivirus shares after the "WannaCry" ransomware attack that hit more than 200,000 computers world-wide.
Read:4 tips to protect yourself from becoming a ransomware victim (http://www.marketwatch.com/story/4-tips-to-protect-yourself-from-becoming-a-ransomware-victim-2017-05-14)
Stock movers: Shares of Advanced Micro Devices Inc. (AMD) slumped 5.4% after the chip maker late Tuesday laid out its new growth plans (http://www.marketwatch.com/story/amd-gains-after-laying-out-plans-for-growth-in-servers-2017-05-16).
Red Robin Gourmet Burgers Inc.(RRGB) soared 18% premarket after the restaurant chain late Tuesday reported better-than-expected (http://www.marketwatch.com/story/red-robin-shares-up-15-after-company-beats-earnings-sales-expectations-2017-05-16) first-quarter earnings and sales.
Oil blues:Oil prices swung between gains and losses (http://www.marketwatch.com/story/oil-prices-under-pressure-amid-fresh-concerns-about-us-supply-2017-05-17), with future for June delivery up 0.8% to $49.07 a barrel, after trading as low as $48.03 earlier in the day.
Read:Why Iran poses most 'underappreciated' upside to oil prices (http://www.marketwatch.com/story/why-iran-poses-most-underappreciated-upside-to-oil-prices-2017-05-16)
(END) Dow Jones Newswires
May 17, 2017 10:38 ET (14:38 GMT)