Dow off 3rd day in row; 20,000 fades from view
NEW YORK — Investor skittishness over coming policies under soon-to-be-president Donald Trump just days before his inauguration put stocks in the red Tuesday and pushed the Dow down for a third straight session.
Also haunting the market was another weak day for bank stocks, a sector that had performed strong at the start of the so-called "Trump rally" after Election Day but is running into profit taking. Shares of Morgan Stanley (MS) were down nearly 4% despite posting its best fourth-quarter since the financial crisis, while Goldman Sachs (GS) fell 3.3% and Citigroup (C) tumbled 2.1%.
The Dow Jones industrial average closed down 59 points, or 0.3%, to 19,827, or roughly 175 points shy of 20,000. At its low point, the Dow was down more than 110 points.
Markets were reacting to Trump comments in the Wall Street Journal suggesting that the U.S. dollar is "too strong" and could hurt U.S. multinationals. The president-elect also questioned an alternative tax reform plan being discussed by Republicans in the House of Representatives. A strong dollar hurts sales and earnings of U.S. companies that do a lot of business abroad.
Trump's comments, not unlike some of his tweets that have caught investors by surprise on individual companies, created fresh uncertainty about what policies will actually be enacted once Trump takes office after Friday's inauguration. Trump's latest comments were viewed as new information by Wall Street.
"Traders get used to (Trump's) comments when they are said over and over again, but these appear to be new comments," says Quincy Krosby, market strategist at Prudential Financial.
Krosby says Trump's recent comments about the competing tax plan being too complicated, "begs the question, 'Then what?'. Who is supposed to supply the specifics. It leaves traders and investors waiting for clarity."
It is commonplace for the U.S. to voice a preference for a strong dollar.
Trump's comments regarding the dollar talked down the value of the greenback versus a basket of foreign currencies. The Wall Street Journal's dollar index was down 1.3%.
"The dollar is clearly weakening today due to Trump’s comments about it being too strong," says Michael Farr, president of money-management firm Farr Miller & Washington. "The dollar is also suffering from Trump’s comments about current Republican tax plans being too complicated. The markets have been pricing in fiscal stimulus in the form of tax reform, repatriation, infrastructure spending, and reduced regulatory oversight. If it has suddenly become less likely that we get that stimulus over the near term, it makes sense that the dollar would fall. This is just another piece of evidence to suggest that the currency markets will dampen the effects of fiscal stimulus."
The Standard & Poor’s 500 index closed down almost 7 points, or 0.3%, to 2267.89, while the Nasdaq composite fell 0.6% to 5538.73.
Bond prices rose. The yield on the 10-year Treasury note fell to 2.329%.
Tobacco giant BAT agrees $49B takeover of Reynolds American
Financial services firm Comerica (CMA) was down 6.5%, while drugmaker Celgene (CELG) was 2.1% lower.
The British pound rose sharply against other currencies after British Prime Minister Theresa May said her country will remain open to new trade opportunities even as it withdraws from the European Union’s single market.