Stocks drop amid talk of shutdown
U.S. stocks fell Wednesday for the first time in three days, the dollar slumped and Treasuries gained as President Donald Trump’s threat to shut down the government sparked concern Congress won’t easily raise the debt ceiling and deliver on tax reform. Oil rose after a report on stockpiles.
All major American equity benchmarks retreated, and the 10-year Treasury yield hit the lowest since June as Trump’s speech late Tuesday prompted Fitch Ratings to warn the country risks a review of its sovereign rating if it fails to raise the limit next month. The dollar slipped amid fresh data showing uneven U.S. growth that contrasted with renewed evidence of strength in Europe ahead of a central bank symposium that begins Thursday in Jackson Hole, Wyo.
Trump’s latest comments, which included talk of ending the North American Free Trade Agreement, rekindled concerns about his administration’s ability to deliver on its fiscal plans and heightened unease about the future of global trade. A day earlier, his Treasury secretary said getting Congress to raise the debt ceiling and reforming the tax code were priorities, sparking a rally of 1 percent in the S&P.
“The increased prospects of a tax reform bill seemed to get most of the credit for the rally” on Tuesday, Matt Maley, an equity strategist at Miller Tabak & Co., wrote in a note to clients. “At least some of that has gone out the window.”
Contributing to the slump are reports that “the relationship between the president and Senate Majority Leader McConnell has broken down badly,” he said.
Trump said that “if we have to close down our government, we’re building that wall” that he wants on the U.S.-Mexico border. He also said that he thinks the U.S. government will “end up probably terminating” NAFTA with Canada and Mexico, though he also said that he has yet to make up his mind.
On Wall Street Wednesday, advertising companies had the biggest losses in the S&P 500 after an industry giant cut its forecast for revenue this year. WPP’s chief executive, Martin Sorrell, warned that its clients are feeling pressure to control their spending. Sorrell, in his list of market trends, cited the online dominance of Google, Facebook and Amazon as factors affecting ad companies.