Choppy day on Wall Street; all eyes on Trump and healthcare(Update 2)

  • Corporate News
  • Wednesday, 22 Mar 2017

The Dow Jones industrial average unofficially closed up 16.5 points, or 0.09 percent, at 18,533.05, the S&P 500 ended up 5.15 points, or 0.24 percent, to 2,166.89 and the Nasdaq Composite f inished 26.20 points, or 0.52 percent, higher to 5,055.78. Japan's SoftBank Group's US$32 billion deal to buy British chip designer ARM Holdings briefly lifted European equities to a three-week high. The FTSEurofirst 300 index ended 0.2 percent higher at 1,338.06. The MSCI world equity index, which tracks shares in 45 nations, rose 0.92 point or 0.2 percent, to 412.15. (Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., July 18, 2016. - REUTERS)

NEW YORK: Wall Street ended mixed after a choppy session on Wednesday as investors focused on President Donald Trump's struggle to push through a healthcare bill and snapped up stocks after a steep drop the day before.

U.S. stocks in the previous session had suffered their worst day since before Trump's election as investors worried that the president's difficulty in overhauling healthcare was a sign he would also face trouble pushing through promised corporate tax cuts that have been behind the market's record-breaking rally since November.

Stocks fell early in the day but later moved higher. Apple rose 1.7 percent and provided the biggest boost to the three major indexes.

"Investors with a lot of cash used yesterday's downturn and the morning's weakness today as a buying opportunity," said Alan Lancz, president of investment advisory firm Alan B. Lancz & Associates in Toledo, Ohio.

Trump and Republican lawmakers appeared to be losing the support they need for controversial healthcare legislation scheduled for a vote in the House of Representatives on Thursday. Losing or delaying the vote would bruise investors' confidence in Trump's legislative ability and his ability to keep his big promises to business.

"If that happens, you could see a little bit of volatility in the market," said David Schiegoleit, managing director at U.S. Bank Private Client Reserve in Los Angeles.

The Dow was weighed down by a 7.05-percent fall in Nike after the world's largest footwear maker missed quarterly revenue estimates.

Oil prices touched four-month lows after data showed U.S. crude inventories rising faster than expected.

The S&P 500 has gained 10 percent since the election, spurred mainly by Trump's agenda of tax cuts and infrastructure spending, but high valuations remain a concern.

The benchmark index is trading at about 18 times expected earnings compared to a 10-year average of 14, according to Thomson Reuters Datastream.

The Dow Jones Industrial Average declined 0.03 percent to end at 20,661.3 points, while the S&P 500 gained 0.19 percent to 2,348.45.

The Nasdaq Composite added 0.48 percent to 5,821.64.

Seven of the 11 major S&P sectors rose, with the technology index's <.SPLRCT> 0.8 percent gain leading the advancers.

The financial sector <.SPSY>, which on Tuesday suffered its worst daily drop since June, lost another 0.2 percent.

Snap Inc jumped 9 percent. The owner of messaging app Snapchat received a second analyst "buy" rating following a red-hot public listing this month.

Sears Holdings slumped 12.31 percent after the retailer warned on Tuesday about its ability to continue as a going concern after years of losses and declining sales.

Advancing issues outnumbered declining ones on the NYSE by a 1.18-to-1 ratio; on Nasdaq, a 1.33-to-1 ratio favored decliners.

The S&P 500 posted 12 new 52-week highs and 14 new lows; the Nasdaq Composite recorded 22 new highs and 87 new lows.

About 6.9 billion shares changed hands in U.S. exchanges, just below the 7.0 billion daily average over the last 20 sessions.

Meanwhile British shares pulled back on Wednesday, weighed by banks and miners, as investors repriced expectations for fiscal easing from the U.S. and a stronger outlook for sterling compounded weakness in the UK stock market.

Britain's blue-chip FTSE 100 index fell 0.7 percent to its lowest level in nearly two weeks, little moved by reports of two dead and several people injured in an attack near the British parliament.

The FTSE underperformed the pan-European STOXX <.STOXX> index, which ended down 0.4 percent, while Britain's mid-cap index <.FTMC> fell 0.8 percent.

"It's a double whammy of the pound not looking so bearish on the 12-18 month view, along with the pullback in global markets," said Kallum Pickering, senior UK economist at Berenberg.

The weak pound has consistently been supporting the index, whose constituents mainly earn foreign currency, up to record levels this year, with the latest all-time high hit on Friday.

But the pound hit its highest levels in almost four weeks on Tuesday after inflation for February shot past the Bank of England's 2 percent target. That has removed an important catalyst for the FTSE to climb higher.

On Wednesday, the pound fell following the Parliament incident before recovering shortly after.

Banks have also been adjusting their forecasts for sterling upwards. Morgan Stanley set out more bullish estimates this month, downgrading their stance on UK large-caps as a result.


British equities were tracking global markets lower, as investors grew concerned that much-anticipated reflationary policies from the new U.S. administration would take longer to materialise than hoped.

Banking and mining, which had seen the greatest gains from the 'Trump trade' as investors bet on reflation and infrastructure spending, were the biggest sector fallers.

"There's a degree of fiscal frustration - what's been driving markets is the hope and promise of fiscal stimulus, tax cuts and deregulation, and investors were expecting many more details than what we have by this point," said Alex Dryden, global market strategist at JP Morgan Asset Management.

"Markets have been very tranquil so far this year, and that suggests to me that any sort of move was going to cause some shockwaves," he added.

On average over a decade, the FTSE sees a 1 percent move once every five days, but in 2017 so far there have been only two daily moves of such magnitude, Dryden said.

Positive economic data and an upturn in basic resource prices contributed to this calm start to the year for the index, which has a 20 percent exposure to commodities.

Miners Rio Tinto , BHP Billiton and Ashtead fell 0.5 to 2.5 percent.

Barclays , Standard Chartered and RBS fell 0.9 to 2.4 percent.

Home improvement retailer Kingfisher fell 5 percent after it said it was concerned uncertainty around French and British politics could hit future demand, after it beat 2016 profit forecasts thanks to solid performance in its home market.

As investors turned to safe haven assets and dividend-yielding stocks, gold miners Randgold Resources and Fresnillo were among a handful of companies making gains, along with telecoms group BT .

"This is a classic risk-off move - people fly to safety, to the names that they know, as they reprice their fiscal policy outlook," said JP Morgan Asset Management's Dryden.

British Airways owner International Consolidated Air and Easyjet fell 2.7 and 2.4 percent respectively. Both airlines would be affected by Britain joining the U.S. in imposing restrictions on carry-on electronic devices on planes coming from certain airports in the Middle East and North Africa

Southeast Asian stock markets ended lower on Wednesday, tracking Asian peers and Wall Street overnight that fell on worries U.S. President Donald Trump will struggle to deliver promised tax cuts and on nervousness ahead of a key healthcare vote.

Trump tried to rally Republican lawmakers behind a plan to dismantle Obamacare on Tuesday, with moderate Republicans worrying that millions of Americans will be hurt by the dismantling of former President Barack Obama's signature healthcare legislation, while conservative lawmakers believe the healthcare bill does not go far enough.

Investors worry a failed healthcare push could also portend trouble for Trump's promise to cut taxes and ease regulation that have propelled the market to record highs in recent months. 

Regional stock markets are down with "the surprise 200-point drop" in U.S. equities, said Joseph Roxas, president of Manila-based Eagle Equities Inc.

In Singapore, shares closed 1.3 percent lower, their third consecutive session of losses, led by energy stocks as global oil prices dipped on rising crude inventory in the United States.

Keppel Corporation Ltd fell 1.6 percent, while Sembcorp Industries Ltd ended 2.8 percent lower. 

The Philippine index fell 0.9 percent, weighed down by financials and consumer stocks, with Metro Pacific Investments Corp, the biggest loser on the index, down 3.2 percent. 

Indonesian shares ended slightly lower, with an index of the 45 most liquid stocks down 0.1 percent.

Malaysia closed down 0.4 percent, while Thailand ended marginally lower.

Vietnam erased earlier gains to close 0.5 percent lower, pulled down by energy and consumer stocks. 

Petrovietnam Gas Joint Stock Corp lost 2.6 percent, while Mobile World Investment Corp fell 1.9 percent.

In Asia, MSCI's broadest index of Asia-Pacific shares outside Japan fell as much as 1.5 percent, while overnight in the U.S. the Dow Jones Industrial Average and the S&P 500 lost more than 1 percent. - Reuters

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