USA TODAY International Edition
TRUMP TROUBLES DRIVE DOW DOWN 372 POINTS
Wall Street, which had been moving steadily higher since November election, suddenly is showing signs of angst
Political turbulence in Washington finally morphed into market risk on Wall Street, putting a dent in the 401( k) account balances of investors who until now had been benefiting from the “Trump rally.”
The Dow Jones industrial average closed down 372.82 points, or 1.8%, to 20,607, Wednesday — its biggest daily point and percentage drop in eight months — as mounting political troubles for Donald Trump have raised fears that the president will have difficulty getting his economic agenda passed through Congress.
“There’s a growing concern that the Republicans in Congress are going to become so preoccupied with the White House mess that they won’t be able to move on their agenda,” which includes a plan to cut taxes and sizable spending on infrastructure, said Tom Block, a policy strategist for research firm Fundstrat Global Advisors.
Thanks to the market’s “Trump bump,” someone who had invested $ 100,000 in an index fund tracking the 500 largest U. S. companies on Election Day would have seen that money grow to $ 112,300 at the market’s recent record high May 15 after a 12.3% rally. But that same investor would have suffered a loss of roughly $ 2,044 in Wednesday’s stock sell- off, which resulted in a 1.8% loss for the S& P 500 stock index.
Stocks sold off on reports that Trump in February allegedly asked then- FBI director James Comey if the law enforcement agency could shut down its probe of ex- national security adviser Michael Flynn. This latest controversy follows news this week that Trump disclosed classified information to Russian diplomats. There are also ongoing questions over the Trump campaign’s ties to Russia leading up to last year’s presidential election.
The U. S. stock market, which had been moving steadily higher in calm trading since Trump was elected, is suddenly showing signs of nervousness. Wednesday’s sell- off marked the first time Trump’s woes have had an outsize negative effect on stocks. Investors had been focusing on an improving U. S. economy and strong corporate earnings in the first quarter rather than the president’s struggle to push forward his economic proposals.
Investor jitters also were visible in stocks’ wild price swings, with the Dow closing down more than 300 points for the first time since Sept. 9 and the market- leading Nasdaq composite declining 2.6%. Money also moved into so- called safe haven assets, such as gold, which rallied 2% to $ 1,260.40 per ounce, and U. S. government bonds, where the yield on the 10- year Treasury note dipped to 2.22%, its lowest level since mid- April. A closely watched Wall Street “fear gauge,” which had recently touched a 24- year low, jumped more than 40% Wednesday, although the fear level remains below its longerterm average.
The latest Trump trouble, which could get worse, is causing a “long- overdue” drop in stock prices Wednesday, said David Kotok, chief investment officer at Cumberland Advisors.
“The catalyst is the Trump debacle,” Kotok said. The risk is “a bogged- down, dysfunctional government becomes too distracted to advance legislation like tax reform. Markets and businesses need and want a tax reform bill.”