Washington drama rattles Wall Street
Dow falls 372 points. Investors fear the turmoil may hinder Trump’s pro-business plan.
The growing political drama in Washington rattled Wall Street on Wednesday, knocking the Dow Jones industrial average down more than 370 points and giving the stock market its biggest single-day slump in eight months.
Investors worried that the political turmoil that has enveloped the White House may hurt President Trump’s ability to see through his pro-business agenda.
Financial stocks, which had soared in the months since the election, declined the most as bond yields fell sharply. Bonds, utilities and gold rose as traders shunned riskier assets. The dollar fell.
Smaller firms would stand to benefit even more than large ones from corporate tax cuts Trump is proposing, and their shares fell more than the rest of the market.
The steep drop ended an unusually long period of calm for the markets, which had been hovering near alltime highs. On Tuesday the Standard & Poor’s 500 index, the benchmark favored by professional investors, marked its 15th straight day of moving up or down by less than 0.5%. It closed at its latest record high Monday.
Bond prices rose sharply Wednesday. The 10-year Treasury yield fell to 2.21% from 2.33%, a large move.
The seeds of Wednesday’s steep sell-off were present late Tuesday, when a news report revealed that Trump allegedly made a personal appeal to now-fired FBI Director James Comey to drop the bureau’s investigation into former National Security Advisor Michael Flynn. The White House denied the report.
“The controversy is not new, but this one really seems to be sticking,” said Erik Davidson, chief investment officer for Wells Fargo Private Bank.
The VIX index, a measure of how much volatility investors expect in stocks, rose to its highest level since April 13. Investors shifted into U.S. government bonds, pushing yields lower, and into gold. The precious metal jumped $22.30, or 1.8%, to $1,258.70 an ounce.
Among the hardest-hit stocks Wednesday were in sectors that benefited most from the post-election rally as investors bet Trump would cut taxes, boost infrastructure spending and relax regulations that affect energy, finance and other businesses.
Banks sank as bond yields declined. Bank of America slid 5.9% to $22.57. Some stocks did well. Target rose 0.9% to $55.04 after the retailer said its first-quarter profit jumped and online sales surged.
Red Robin Gourmet Burgers soared 23.1% to $71.40 after the restaurant chain reported earnings that handily beat forecasts.
Jack in the Box climbed 5.7% to $107.67 after the fastfood firm said it would consider spinning off its Qdoba Mexican restaurant chain.
Unease over potential implications of the political fallout weighed on the dollar. The euro rose to $1.1150 from $1.1095. The dollar slid to 111.11 yen from 113.03 yen.
Benchmark U.S. crude rose 41 cents, or 0.8%, to $49.07 a barrel. Brent crude, used to price international oils, rose 56 cents, or 1.1%, to $52.21 a barrel.
Natural gas fell 4 cents to $3.19 per 1,000 cubic feet. Wholesale gasoline was flat at $1.60 a gallon. Heating oil rose 2 cents to $1.53 a gallon.
Silver rose 16 cents to $16.85 an ounce. Copper was flat at $2.54 a pound.