DC worries send stocks down before bounce back
NEW YORK - Worries that Washington might not be able to help businesses as much as once thought knocked stock indexes down hard early Monday, but they clawed back most of their losses and ended the day mixed.
The Standard & Poor’s 500 index fell 2.39 points, or 0.1 percent, to 2,341.59 for its seventh drop in the past eight days. The Dow Jones industrial average sank 45.74, or 0.2percent, to 20,550.98, while the Nasdaq composite index rose 11.64, or 0.2 percent, to 5,840.37.
When trading opened for the day, it looked as though losses would be much worse. The S&P 500 sank from the start and was down as much as 0.9 percent.
The weakness came after last week’s failure by Republicans to repeal the Affordable Care Act, something they’ve been pledging to do for years, which raised doubts that Washington can push through promises to help businesses. Investors have been anticipating that President Donald Trump and the Republican-led Congress will cut taxes, loosen regulations for companies and institute other corporate-friendly policies.
Indexes recovered most of their losses in the afternoon, largely thanks to gains in hospital and other health care stocks. Tax cuts, deregulation and other business-friendly moves could still happen, but even if they don’t, the stock market has several pillars of support, said John Manley, chief equity strategist at Wells Fargo Funds Management.
“Trump lucked out when he got elected president because it was just as earnings were coming out of a two-year slumber,” he said. “I think it’s been as much, if not more, about earnings as it’s been him” behind the 9.4 percent rise for the S&P 500 since Election Day.
An improving economy is translating into bigger profits for businesses, which are set to report their first-quarter results in the coming weeks. The Federal Reserve, meanwhile, is moving very slowly in raising interest rates and is loath to apply the brakes to the economy too quickly.
“Investors have to acknowledge that a 5 percent correction can happen at any time, and the fact that we haven’t had a 1 percent down day for so long is extraordinary,” Manley said. “But the things that are usually responsible for a major market decline just don’t seem to be in place.”
The S&P 500 has lost 1 percent in a day just once since mid-October.
Interest rates fell Monday. The yield on the 10-year Treasury dropped to 2.37 percent from 2.41 percent late Friday. Just a couple of weeks ago, it was above 2.6 percent.
Bank stocks have tracked the movements of Treasury yields recently because higher interest rates would allow them to charge more for loans and reap bigger profits. Investors also expected financial companies to be some of the biggest beneficiaries of easier regulations with a Republican-led White House.
The price of gold rose $7.20 to settle at $1,255.70 an ounce. Silver rose 36 cents to $18.11 per ounce. Copper was close to flat at $2.63 per pound.
The dollar fell to 110.57 Japanese yen from 110.80 late Friday. The euro rose to $1.0868 from $1.0808, and the British pound rose to $1.2566 from $1.2500.