U.S. President Donald Trump steps from Air Force One in Groton, Conn, on May 17. (Kevin Lamarque/Reuters)
The S&P 500 and the Dow were headed for their worst day in more than eight months as reports of a leaked memo by former FBI chief James Comey spooked investors, raising questions about whether President Donald Trump tried to interfere with a federal investigation.
Mr. Trump asked Mr. Comey to end a probe into former National Security Adviser Michael Flynn’s ties with Russia, according to the reports.
The news comes on the heels of a tumultuous week at the White House when Mr. Trump unexpectedly fired Mr. Comey and then disclosed classified information to Russia’s foreign minister about a planned Islamic State operation.
The latest developments cast a shadow over Mr. Trump’s proposed business-friendly policies such as tax cuts and simpler bank regulations, which have underpinned a record-setting rally on Wall Street.
“I think the biggest issue right now is what does this mean for the plan that we thought we were on,” said Jeremy Bryan portfolio manager at Gradient Investments in Arden Hills, Minn. “Is it delayed or is it dead?”
Bank stocks, which outperformed in the post-election rally, were the worst hit. The S&P 500 financial sector tumbled more than 2 percent, led by losses in Bank of America and JPMorgan.
Goldman Sachs was the biggest drag on the Dow.
Both the Dow and the S&P 500 fell below their 50-day moving average for first time since late April.
The Dow Jones Industrial Average was down 234.47 points, or 1.12 per cent, at 20,745.28, the S&P 500 was down 24.18 points, or 1.01 per cent, at 2,376.49 and the Nasdaq Composite index was down 83.65 points, or 1.36 per cent, at 6,086.22.
Canada’s main stock index also fell on Wednesday, tracking global market concerns that Mr. Trump’s pro-business economic agenda could be slowed by political scandals, with financial stocks leading declines.
At 11:13 a.m. ET, the TSX was down 170.9 points, or 1.10 per cent, to 15,372.44.
Seven of the index’s top 10 sectors fell more than 1 per cent. The materials sector, which include mining stocks, was the lone gainer, adding 0.6 percent partly on the back of higher gold prices.
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The dollar index sank on Wednesday, erasing all of the gains inspired by Trump’s pro-growth stance after his November election victory. The euro hit its highest level since Nov. 7, while prices of gold hit a one-month high.
The VIX, Wall Street’s “fear gauge,” shot up to 12.8 points and was on track for its biggest one-day percentage increase since August.
“We’re largely through the earnings season, so political uncertainty is probably going to be the largest source of risk in the next three to six months.” Bryan said.
Nine of the 11 major S&P 500 sectors were lower.
Utilities and real estate sectors – preferred investment options in times of uncertainty due to their slow but predictable growth – were the only gainers.
The most influential movers on the Toronto Stock Exchange’s S&P/TSX composite index were dominated by financial firms, which make up roughly a third of the index’s weight. The group slid 1.4 percent.
Royal Bank of Canada shed 1.4 per cent to $91.745, while Toronto Dominion Bank lost 1.1 per cent to $62.41. Insurer Manulife Financial Corp dropped 3.0 per cent to $23.01.
Bullion hit a two-week high as the Trump scandals and weak U.S. economic data trimmed expectations the Federal Reserve would aggressively raise interest rates this year, pushing the U.S. dollar to its weakest level in six months. A weak greenback makes the precious metal cheaper for non-U.S. investors.
The bulk of the top 30 stocks that advanced were gold mining companies, with Barrick Gold Corp leading the charge. Barrick rose 2.2 per cent to $23.53, while Agnico Eagle Mines Ltd was up 2.1 per cent at $68.17. Gold futures rose 1.8 percent to $1,256.9 an ounce.
Oil and gas stocks retreated 1.0 per cent despite higher crude oil prices. Enbridge Inc fell 2.2 per cent to $52.68.
Oil prices strengthened on Wednesday ahead of U.S. crude inventory data that could give investors a clue as to whether an OPEC-led output cut is making progress in reducing a persistent global supply overhang.
Brent crude was up 50 cents at $52.15 per barrel. U.S. light crude rose 39 cents to $49.05.
Both benchmark prices started the day in negative territory after industry data from the American Petroleum Institute (API) estimated that U.S. crude stocks had risen by 882,000 barrels in the week ending May 12 to 523 million barrels.
That defied expectations of analysts who estimated a draw in the stockpiles of 2.4 million barrels, according to a Reuters survey. Data from the Energy Information Agency, seen as more complete, is due at 1430 GMT on Wednesday.
Brent reached $52.63 a barrel and WTI rose as high as $49.66 on Monday after Saudi Arabia and Russia agreed on the need to extend output curbs by members of the Organization of the Petroleum Exporting Countries and other producers.
The supply cuts of 1.8 million barrels per day (bpd) were initially agreed to run during the first half of 2017. Riyadh and Moscow say they should be extended until March. An extension is due to be discussed at an OPEC meeting on May 25.
“The oil rally has paused and whether it can resume depends on today’s EIA inventory report,” said Ole Hansen, head of commodity strategy at Saxo Bank.
“Having seen an initial short-covering rally, we now need OPEC and non-OPEC producers agreeing on the nine-month extension for the market to begin build up new long positions,” Saxo’s Hansen said.
OPEC nations such as Kuwait, Iraq, Oman and Venezuela have said they supported an extension to the supply cuts, signaling that the meeting next week will go smoothly. Some analysts have said a deeper cut could even be on the table.