Stocks fall on talk of Trump impeachment inquiry

Stocks dropped Tuesday as House Democrats met to consider an impeachment investigation of President Donald Trump and as a report showed a drop in consumer confidence.

After posting early gains, stocks declined as the Conference Board, a business research group, reported that its consumer confidence index fell to 125.1 in September from a revised reading of 134.2 in August. That’s considered worrisome because consumer spending has underpinned the economy during a slowdown in manufacturing.

The drop in stocks intensified after reports said a growing number of Democrats were in favor of launching an impeachment inquiry against the president and that House Democrats were meeting to consider the possibility. Stocks recovered somewhat after Trump said he plans to release the full transcript of a July phone call with Ukraine’s president that was at the center of the Democrats’ discussions.

After the markets closed, House Speaker Nancy Pelosi announced the House is moving forward with an official impeachment inquiry.

Tuesday was the market’s most volatile day this month.

The S&P 500 index fell 25.18 points, or 0.8%, to 2,966.60. The benchmark index remains within 2% of its record high set in late July.

The Dow slid 142.22 points, or 0.5%, to 26,807.77. The Nasdaq lost 118.83 points, or 1.5%, to 7,993.63.

Traders also turned away from smaller-company stocks. The Russell 2000 index gave up 24.64 points, or 1.6%, to 1,533.61.

“News of increased likelihood of impeachment proceedings has just added to this overall level of uncertainty that’s out there right now,” said Willie Delwiche, investment strategist at Baird.

The swings in stocks Tuesday disrupted the relative calm that has distinguished the market in September. Traders sought safety as they piled into bonds, sending yields sharply lower. They also bid up utilities and makers of household goods. All other sectors declined.

Trade news was also in the mix Tuesday. Investors were optimistic after U.S. Treasury Secretary Steven Mnuchin confirmed that trade negotiations with China will resume the week of Oct. 7. But Trump dampened that sentiment with remarks before the U.N. General Assembly, where he underscored the need for a fair trade deal with China.

Tuesday’s volatile turn in the market was a break from what has mostly been a positive run for stocks this month after trade tensions between the U.S. and China eased somewhat, fueling speculation among investors that the countries’ next round of negotiations might at least yield an interim deal.

While uncertainty over an impeachment inquiry unsteadied markets Tuesday, history shows that the impeachment of a president doesn’t necessarily mean disaster for the stock market.

The S&P 500 dropped 1.7% on Sept. 9, 1998, when independent counsel Kenneth Starr delivered his report to Congress on possible impeachable offenses by President Bill Clinton. But concern that slumping economies abroad would drag down the U.S. economy was the bigger story of the day for the market.

Two days later, when Starr’s report was released to the public, the S&P 500 jumped 2.9% after investors saw the allegations weren’t as bad as some had feared.

Stocks veered up and down in the weeks that followed but were solidly higher when the House of Representatives voted in December 1998 to impeach Clinton. When trading opened for the first time after just the second impeachment in the nation’s history, the S&P 500 rose 1.2%.

Stocks would keep jumping as they inflated until the dot-com bubble burst in 2000.