Political Unease Reverberates Across Global Markets
S&P 500 edges up 0.1%
-- Stoxx Europe 600 sheds 1%, Nikkei off 1.3%
-- WSJ Dollar Index rises 0.2%
U.S. stock indexes, government bonds and the dollar steadied Thursday as nervousness about the Trump administration's ability to push through its agenda continued to ripple through financial markets.
Major indexes elsewhere around the world fell, while the Dow Jones Industrial Average lost 5 points, or less than 0.1%, to 20599 shortly after the opening bell. The S&P 500 gained 0.1% and the Nasdaq Composite rose 0.1%.
Recent political developments have put the Trump administration on the defensive and raised concerns among investors about the administration's ability to push through proposals on tax cuts, deregulation and infrastructure spending. Wednesday's declines interrupted a period of unusual calm in the stock market, sending the Dow industrials on their biggest one-day decline since September.
"Everything happening in Washington is likely to if not derail, at least delay what the market expectation has been about significant tax reform and tax reduction," said David Lafferty, chief market strategist at Natixis Global Asset Management.
News that former FBI Director Robert Mueller will serve as special counsel to oversee a federal investigation into alleged Russian interference in the 2016 presidential election did little to calm investors Thursday.
"Two weeks ago, we were talking about policy, and now we're talking about all of the political firestorm swirling around the White House," said Brett Wander, CIO for fixed income at Charles Schwab Investment Management.
U.S. government bonds held steady Thursday, with the yield on the 10-year U.S. Treasury note at 2.217%, according to Tradeweb, from 2.216% Wednesday. On Wednesday, Treasury yields posted their biggest one-day decline since the week of the U.K. referendum in June.
In currencies, the dollar showed signs of recovering Thursday from its worst session since March. The WSJ Dollar Index, which measures the dollar against a basket of 16 currencies, inched up 0.2%.
Many investors say longer term, the jitters in Washington were unlikely to detail a buoyant global economy and solid corporate earnings that had recently lifted stocks to record highs.
"We've been suggesting clients should be looking for setbacks like this as an opportunity to deploy funds in growth-related assets rather than see it as the harbinger of another massive setback," said Kevin Gardiner, global investment strategist at Rothschild Wealth Management.
"The U.S. consumer has plenty of gas in the tank even without tax cuts," he said, noting the economy was beginning to pick up even ahead of the U.S. election in November.
Data Thursday showed the number of Americans applying for first-time unemployment benefits fell last week for the third consecutive time in a fresh sign of steady job creation.
"From a fundamental investor perspective, I'm not seeing anything that shakes my view that the U.S. economy is ticking along just fine," said James Athey, a manager at Aberdeen Asset Management, which manages $385.2 billion in assets.
In corporate news, shares of Wal-Mart Stores climbed 2.7% after the world's largest retailer reported stronger quarterly sales.
Shares of Cisco Systems fell 7.7% after it said it would lay off an additional 1,100 employees and forecast a drop in quarterly revenue.
Elsewhere, the Stoxx Europe 600 fell 1% amid declines in banks, miners and auto companies.
Earlier, Japan's Nikkei Stock Average fell 1.3% as a global flight to haven assets boosted the value of the yen, weighing on the country's exporters, particularly in the auto sector. Declines in Japanese shares came despite economic data that showed first-quarter gross domestic product expanded 2.2% from a year earlier.
--Akane Otani contributed to this article.
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(END) Dow Jones Newswires
May 18, 2017 10:05 ET (14:05 GMT)