Investing.com – With no major economic news on the docket, Wall Street slumped 1% as worries over political developments in the U.S. dominated market headlines, but oil jumped as investors celebrated a draw in U.S. crude inventories.
At 11:39AM ET (15:39GMT), the Dow Jones tumbled 249 points, or 1.19%, the S&P 500 lost 27 points, or 1.11%, while the Nasdaq Composite traded down 102 points, or 1.65%.
Markets were unnerved after media reports said President Trump asked then-FBI Director James Comey to end a probe into Michael Flynn, his former National Security Advisor, relating to alleged ties with Russia.
The news came one day after a report accused Trump of disclosing sensitive intelligence obtained from a close U.S. ally with Russia's foreign minister about an Islamic State operation.
The reports added to concerns that the President will be unable to successfully push through his economic stimulus program in the face of mounting controversies.
In fact, U.S. stocks hit session lows as Justin Amash became the first Republican party member to suggest that if the allegations surrounding the James Comey memos are true, they would be grounds for impeachment.
The news also sparked a rally in safe haven, such as the yen, Swiss franc, gold and U.S. Treasuries, which are often used as a hedge in times of political uncertainty.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, weakened for a sixth straight day as investors appeared to lose faith amid the political turmoil on Capitol Hill.
With tempers flaring in Washington, markets also appeared to see lower chances that Trump fiscal policies would back the Federal Reserve’s (Fed) intentions to move forward with the removal of accommodative monetary policy.
According to Investing.com’s Fed Rate Monitor Tool, Fed fund futures currently price in the chance of the first rate hike arriving in June at around just 60%, after having risen above 80% the prior week.
Outside the political arena, oil surged around 1% Wednesday as data showed U.S. crude stockpiles fell for the sixth week in a row.
That was despite the fact that the 1.8 million barrel draw was less than the forecast for a decline of 2.4 million.
Still, oil had rallied to its highest since April 28 at $49.66 at the start of the week on news that Saudi Arabia and Russia agreed to extend oil output cuts for a further nine months until March 2018.
U.S. crude futures gained 1.25% to $49.27 by 11:40AM ET (15:40GMT), while Brent oil rose 1.51% to $52.43.
In light session for company news flow, shares in American Eagle Outfitters (NYSE:AEO) tumbled 10% after reporting a 38% in first quarter profit.
Target (NYSE:TGT) however broke the general trend and shares were up 2% after the second largest U.S. retailer reported a smaller-than-expected decline in comparable sales.
In other positive news, Colgate-Palmolive (NYSE:CL) jumped 3% as the company's chief executive recently signaled he would be open to selling the company for $100 a share, according to a source cited by The New York Post.
After markets close, Cisco Systems (NASDAQ:CSCO) and L Brands (NYSE:LB) are set to report results.