President Donald J. Trump's alleged interference with a federal investigation set alarm bells ringing in the stock market. Both the Dow and the Standard & Poor 500 suffered their steepest one day dip since September 9th. Investor hopes for any kind of pro-business policies and tax cuts have begun to fade as a result of these developments. It did not help matters that James Comey, the former head of the FBI, said Trump had urged him to end the investigation into Michael Flynn's links with Russia. Flynn was the National Security Adviser before Trump fired him.
Losses all around
Nasdaq suffered the maximum loss for a day since June 24th, which was the day news was released of the UK’s decision to exit the European Union. The S&P technology and S&P finance saw losses as the technology sector dropped 2.8 percent, and the financial sector fell by 3 percent.
The White House had a rocky week after Trump’s sudden firing of Comey, the FBI Chief. He also reportedly disclosed sensitive and classified information to the foreign minister of Russia concerning an operation relating to Islamic States. These developments planted a seed of uncertainty into investors' minds. Their confidence in the President’s ability to fulfill his pre-election promises of fiscal stimulus, tax cuts and deregulation is dwindling. Investor anticipation for such promises resulted in record setting Wall Street rallies. Selling increased in the afternoon hours of May 17th and three important indexes closed near their session’s lows.
Both the S&P 500 and the Dow dropped below the 50 day moving average for the time since the latter days of April. The S&P started the session about 0.74 percent lower. This was the biggest down opening since March 30, 2009 which started with a fateful 0.84 percent down. The DJIA or Dow Jones Industrial Average fell 1.78 percent or 372.82 points to 20,606.93. The Standard & Poor 500 lost 1.82 percent or 43.64 points to 2,357.03. The Nasdaq Composite dipped 2.57 percent or 158.63 points to 6,011.24. VIX, the “fear gauge” of Wall Street increased to 15.34, which is the highest its been since April 18th. The S&P bank sub-sector fell 4 percent. Leading the downward trend was Bank of America with a 5.9 percent dip. JPMorgan followed close behind with a 3.8 percent drop.
According to Donald Selkin of New York's Newbridge Securities, the bull market continues, but an absence of motivation due to politics have dampened enthusiasm. The earnings season is also three months away.