The Middletown Press (Middletown, CT)
Markets rattled by turmoil in Washington
The growing political drama in Washington rattled Wall Street 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 headline-fueled political turmoil that has enveloped the White House may hinder President Donald Trump’s plans to cut taxes, roll back government regulations and other aspects of his pro-business agenda.
The steep drop ended an unusually long period of calm for the markets, which had been hovering near all-time highs.
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.
“When you are at these valuations, the market has to reassess whether or not the agenda is actually going to be implemented,” said Quincy Krosby, market strategist at Prudential Financial. “What you’re seeing is a classic run toward safety.”
The Standard & Poor’s 500 index had its biggest drop since September, sliding 43.64 points, or 1.8 percent, to 2,357.03. The Dow lost 372.82 points, or 1.8 percent, to 20,606.93. The Nasdaq composite index, coming off setting two consecutive record highs, gave up 158.63 points, or 2.6 percent, to 6,011.24.
Small-company stocks fell more than the rest of the market. The Russell 2000 index sank 38.79 points, or 2.8 percent, to 1,355.89. Those companies would stand to benefit even more than large ones from corporate tax cuts Trump is proposing. They also had risen sharply in the months following the election.
Bond prices rose sharply. The 10-year Treasury yield fell to 2.21 percent from 2.33 percent late Tuesday, a large move.
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 1.8 percent, climbing $22.30 to settle at $1,258.70 per ounce.
Among the hardest-hit stocks Wednesday were those in sectors that benefited most from the postelection rally as investors banked on Trump to cut taxes, boost infrastructure spending and relax regulations that affect energy, finance and other businesses.
Banks fell sharply as bond yields declined, which will mean lower interest rates on loans. Bank of America slid $1.42, or 5.9 percent, to $22.57.
Unease over the potential implications of the latest political fallout in Washington weighed on the dollar Wednesday. The euro strengthened to $1.1150 from $1.1095. The dollar dropped to 111.11 yen from 113.03 yen.
Benchmark U.S. crude rose 41 cents, or 0.8 percent, to close at $49.07 per barrel in New York. Brent crude, used to price international oils, gained 56 cents, or 1.1 percent, to close at $52.21 per barrel in London. In other futures trading, natural gas fell 4 cents to $3.19 per 1,000 cubic feet. Wholesale gasoline was little changed at $1.60 per gallon. Heating oil rose 2 cents to $1.53 per gallon.
Among other commodities, silver added 16 cents to $16.85 per ounce. Copper was little changed at $2.54 per pound.