Stocks dip on fears that Trump Effect has stalled
Difficult day for S&P 500 as markets become ‘fed up’ with lack of progress
U.S. and European shares tumbled on Tuesday on concerns that higher interest rates and pro-growth U.S. policies were on hold, boosting safe-haven Treasuries and gold and sending the dollar to a nearly four-month low against the yen.
The U.S. S&P 500 financial sector fell as much as 3.1 per cent and posted its biggest daily plunge in about nine months, contributing to the worst daily performance for the benchmark S&P 500 since Oct. 11.
Analysts attributed the selling to reduced confidence that U.S. President Donald Trump’s pro-growth policies, including financial deregulation, would occur soon, and to concerns about a dovish Federal Reserve. The Fed stuck to its outlook for two more hikes this year last week, instead of the three expected by many market participants.
Investors also saw the Trump administration’s struggles to push through the health-care legislation overhaul as a sign he may also face setbacks delivering promised corporate tax cuts. “The market is starting to get a little fed up with the lack of progress in health care because everything else is being put on the back burner,” said R.J. Grant, head of trading at Keefe, Bruyette & Woods in New York.
“With the health-care morass, the Trump effect is taking a little bit of a back seat in people’s minds,” said Steve Sosnick, an equity risk manager at Timber Hill, the market-making unit of Greenwich, Conn.-based Interactive Brokers Group. “It feels like the market needs another catalyst. The catalysts had been coming largely from the Fed and the Trump effect. Something is spooking people.”
Mark Kepner, managing director at Themis Trading in Chatham, N.J., added, “You have this back and forth in Congress with the new health-care plan and you have this belief that if the health-care plan can’t pass, then they can’t move on to taxes. There’s this feeling that if things don’t get done, then maybe what the market has been anticipating gets held up.”
“This is the bloom off the rose,” said Niall Brown, a portfolio manager at Morgan Meighen & Associates. “The market is suddenly realizing maybe things aren’t going to get enacted in as business-friendly a manner as he was hoping. The North American banks certainly took a good ding today as a result.”
The Toronto Stock Exchange’s S&P/TSX composite index also ended down 129.19 points, or 0.84 per cent, at 15,313.13.
Of the index’s 10 main groups, only the typically defensive telecoms and utilities sectors ended in positive territory, while gold miners also gained as bullion benefited from a weaker U.S. dollar.
The most influential gainers on the index included Barrick Gold Corp, which advanced 2.1 per cent to $25.99. The world’s largest gold producer said a World Bank arbitration tribunal had ruled in favour of it and joint venture partner Antofagasta plc over a copper project in Pakistan.
The U.S. Nasdaq Composite fell as much as 1.9 per cent after hitting a record intraday high earlier on the back of a rise in Apple shares, which briefly touched a record $142.80 a share before falling 1.15 per cent to close at $139.84.
Europe’s broad FTSEurofirst 300 stock index also fell after hitting a 15-month high, to close down 0.50 per cent at 1,480.99.
Safe-haven gold, the yen and U.S. Treasuries all benefited. The dollar hit 111.55 yen, its lowest since Nov. 28, while gold hit a more than twoweek high of $1,247.60 an ounce and benchmark 10-year U.S. Treasury note yields touched a nearly three-week low of 2.419 per cent.
The euro hit $1.0819, its highest against the dollar since Feb. 2.
U.S. crude oil prices hit a oneweek low of $47.23 a barrel as concerns about new supplies overshadowed the latest talk by OPEC that it was looking to extend output cuts beyond June.