Stocks sell off on US Prez concern; $ at Nov level

US stocks and the dollar dropped and bond prices rallied on Wednesday as investors fled risky assets amid uncertainty about US President Donald Trump’s ability to deliver on tax and regulatory reform.

Reports that Trump asked then-FBI Director James Comey to end a probe into the former national security adviser have raised questions over whether Trump tried to interfere with a federal investigation.

All three major US stock indexes were down more than 1 per cent. The S&P 500 was briefly on track for its worst day since September 13, but pared some of those losses to put it on track for its biggest daily fall in about two months. The dollar index has erased its post-election gains.

The news comes on the heels of a tumultuous week at the White House when Trump unexpectedly fired Comey and reportedly disclosed classified information to Russia’s foreign minister about a planned Islamic State operation.

Optimism over pro-growth policies under Trump drove a sharp rally in US stocks after the November 8 US election.

The dollar index, which tracks the US currency against six peers and had scaled a 14year peak of 103.82 on January 3, fell 0.4 per cent to its lowest level since November 9, surrendering all of its “Trump bump” gains. “We’re getting into stall mode because of the early expectations for the Trump presidency. It’s all being put well on the back burner and even off the stove. It’s kind of worrisome as it could take time to muddle through this,” said Joseph Benanti, managing director, senior sales trader at Rosenblatt Securities in New York.

The Dow Jones Industrial Average was down 254.56 points, or 1.21 per cent, to 20,725.19, the S&P 500 had lost 27.87 points, or 1.16 per cent, to 2,372.8 and the Nasdaq Composite had dropped 108.10 points, or 1.75 per cent, to 6,061.77. Both the Dow and S&P 500 fell below their 50-day moving averages for the first time since April 21.

Volatility spiked. The CBOE Volatility index was up 2.8 points.

Bank stocks, which outperformed in the post-election rally, were the worst hit. The S&P 500 financial sector tumbled more than 2 per cent, led by losses in Bank of America and JPMorgan.