🎈 Up Big Today: Find today's biggest gainers with our free screenerTry Stock Screener

Stocks sell off on Trump concern; dollar at Nov low

Published 05/17/2017, 12:28 PM
© Reuters. A trader works on the floor of the New York Stock Exchange in New York
XAU/USD
-
US500
-
DJI
-
BAC
-
JPM
-
DX
-
GC
-
LCO
-
CL
-
IXIC
-
US10YT=X
-
VIX
-
FTEU3
-
MIWD00000PUS
-
DXY
-
SPSY
-

By Caroline Valetkevitch

NEW YORK (Reuters) - U.S. stocks and the dollar dropped and bond prices rallied on Wednesday as investors fled risky assets amid uncertainty about U.S. President Donald Trump's ability to deliver on tax and regulatory reform.

Reports that Trump asked then-FBI Director James Comey to end a probe into the former national security adviser have raised questions over whether Trump tried to interfere with a federal investigation.

All three major U.S. stock indexes were down more than 1 percent. The S&P 500 was briefly on track for its worst day since Sept. 13, but pared some of those losses to put it on track for its biggest daily fall in about two months. The dollar index (DXY) has erased its post-election gains.

The news comes on the heels of a tumultuous week at the White House when Trump unexpectedly fired Comey and reportedly disclosed classified information to Russia's foreign minister about a planned Islamic State operation.

Optimism over pro-growth policies under Trump drove a sharp rally in U.S. stocks after the Nov. 8 U.S. election.

"We're getting into stall mode because of the early expectations for the Trump presidency. It's all being put well on the back burner and even off the stove. It's kind of worrisome as it could take time to muddle through this," said Joseph Benanti, managing director, senior sales trader at Rosenblatt Securities in New York.

The Dow Jones Industrial Average (DJI) was down 254.56 points, or 1.21 percent, to 20,725.19, the S&P 500 (SPX) had lost 27.87 points, or 1.16 percent, to 2,372.8 and the Nasdaq Composite (IXIC) had dropped 108.10 points, or 1.75 percent, to 6,061.77.

Both the Dow and S&P 500 fell below their 50-day moving averages for the first time since April 21.

Volatility spiked. The CBOE Volatility index (VIX) was up 2.8 points.

Bank stocks, which outperformed in the post-election rally, were the worst hit. The S&P 500 financial sector (SPSY) tumbled more than 2 percent, led by losses in Bank of America (N:BAC) and JPMorgan (N:JPM).

At nearly 18 times forward earnings, the S&P 500 trades at a significant premium to its long-term average valuations of 15 times, according to Thomson Reuters data.

MSCI's gauge of stocks across the globe (MIWD00000PUS) fell 0.9 percent, while European shares (FTEU3) ended down 1.4 percent.

Several money managers said they were not yet likely to make changes in their portfolio as a result of the latest White House news.

"We aren't likely to make major changes. We are already well positioned, but we need to think about a more negative scenario re tax reform versus what we were previously thinking," said Edward Perkin, chief equity investment officer at Eaton Vance.

The dollar index, which tracks the U.S. currency against six peers and had scaled a 14-year peak of 103.82 on Jan. 3, fell 0.4 percent to its lowest level since Nov. 9, surrendering all of its "Trump bump" gains.

U.S. Treasury yields fell, with benchmark 10-year notes (US10YT=RR) up 23/32 in price to yield 2.25 percent, the lowest level since April.

In commodity markets, safe-haven gold hit a two-week high, while oil prices were higher. Spot gold rose for a fifth day and was up 1.8 percent at $1,258.38 an ounce.

Brent crude (LCOc1) was up 1.6 percent at $52.49 per barrel, while U.S. light crude (CLc1) rose 1.4 percent to $49.34.

© Reuters. A trader works on the floor of the New York Stock Exchange in New York

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.