Dow ends week in red as political jitters give pause to investors
Attacks in Spain also weigh negatively on Wall Street sentiment
The Dow finished lower for a second consecutive week as political jitters set off alarm bells on Wall Street and prompted investors to reassess the stock market’s next move after its record- setting run.
The Dow Jones industrial average fell more than 76 points Friday to 21,674.51, extending a rout that began Thursday when it plunged 274 points, its biggest one- day dive in three months.
Investors are unsure where the stock market — which is pricey compared with its history — is headed next, as fresh risks ranging from President Trump’s political troubles to continued earnings weakness in retail shares give them pause.
For the week, the Dow fell nearly 1%, trimming its year- to- date gain to 9.7% and leaving it 2.1% below its Aug. 7 record high.
The Dow’s turbulence began Thursday amid fears that the bold decision by many of the nation’s top CEOs to distance themselves from Trump due to his reaction to the deadly protest in Virginia last weekend could make it harder for him to get his economic agenda passed through Congress.
“Risk appetite has taken a renewed hit in the face from the political turmoil at the White House and the implications for fiscal policy paralysis,” said David Rosenberg, chief economist and strategist at Gluskin Sheff.
The terrorist attacks in Spain on Thursday also weighed negatively on investor sentiment.
For the week, the large- company Standard & Poor’s 500 index fell 0.7% and the tech- packed Nasdaq composite declined 0.6%.
Carnage in the retail sector continued with shares of Foot Locker, the athletic apparel and shoe retailer, plunging 28% Friday after it reported a worse- than- expected 6% quarterly drop in sales at its stores.
Wall Street, however, isn’t in panic mode, yet. Joe Quinlan, chief market strategist at U. S. Trust in New York, says he doesn’t think the recent bout of volatility will derail the market, as business conditions and corporate earnings remain solid both in the U. S. and abroad.
“Politics have intruded on the market’s march higher, but the impact will not be long lasting,” Quinlan says.
Investors are also wary of the calendar, as August has been the worst- performing month for the Dow the past 20 years. Also giving investors pause is the fact that the Dow and S& P 500 haven’t suffered a pullback of 5% or more since the Brexit shock in June 2016. Many Wall Street pros think the market is due for a pause.
Investors are closely watching the persistent weakness in smallcompany stocks. The Russell 2000, a small- cap index, briefly gave up its gains for the year Friday before ending the week flat for the year and down 6.4% from its July 25 peak.
The weakness in small company shares is a worrisome sign for Wall Street, as it signals investors are pulling back on risk. It also raises red flags about the health of the U. S. economy, as smaller companies get the bulk of their sales domestically.