Stocks weaken amid Washington worries

Stock markets took a brief tumble Monday, the first full day of trading after President Donald Trump’s health care efforts fell short, an apparent sign to investors that hopes of a tax overhaul and financial stimulus may be in doubt.

The major market indicators fell to their lowest levels since early February in intraday trading Monday. After dropping about 1 percent in the morning, the benchmark Standard & Poor’s 500 stock index later recovered. By the end of regular trading, it closed slightly lower.

Leading the market lower were shares of banks and other financial companies. Shares of both Goldman Sachs and Bank of America were down more than 1 percent; Morgan Stanley stock was down more than 2 percent.

Among the gainers were shares of hospital operators. HCA shares were up 4.7 percent, Universal Health Systems was up nearly 4 percent, and Community Health Systems was up nearly 1 percent.

While recent declines in the market have been very modest from a historical perspective, they have nonetheless rattled the narrative told since the November election that no amount of political turmoil in Washington or elsewhere would distract investors focused on Trump’s pledges to cut taxes and roll back regulation.

Buoyed by the promise of both houses of Congress and the White House being in Republican control, investors had narrowed their sights on such measures that would be friendly to business, as well as the pro-growth stimulus of infrastructure spending.

But the collapse Friday of the health care bill has cast uncertainty on the other parts of his agenda. Republicans have already started discussing scaling back ambitious tax overhaul plans.

“The U.S. market had already started to weaken over the last month over concerns about the U.S. administration, and the reform agenda that they had,” said Graham Secker, a London-based equities strategist at Morgan Stanley. “It crystallized those concerns on Friday.”

“Arguably, people were too complacent on the political uncertainty,” he added.

An awareness of that complacency and sense that markets had become too exuberant had already led some investors to pull back.

Investors pulled $1 billion from U.S.-based stock funds based for the week that ended March 22, according to Lipper data from Thomson Reuters, the first week of net withdrawals since January.

And volatility may be inching back. Wall Street’s fear gauge, the Chicago Board Options Exchange Volatility Index, or VIX, climbed Monday for the fifth time in the past six trading sessions.

The dollar fell in value against other major currencies.