US equities fell sharply on Wednesday as political turbulence in Washington prompted investors to unwind previous bets based on hopes for tax and other reforms from the Trump administration.
The Dow Jones Industrial Average tumbled 1.78 percent to 20,606.93 and the S&P 500 index shed 1.82 percent to 2,357.03, suffering their biggest one-day fall in more than eight months.
The tech-heavy Nasdaq Composite plunged 2.57 percent to 6,011.24.
The VIX, Wall Street’s “fear gauge”, shot up to its highest level since April 18, Reuters reports.
Share prices plummeted as investor hopes for tax cuts and other pro-business policies faded as President Donald Trump seemed to be caught up in a widening political crisis.
Reports that former FBI chief James Comey said in a memo that Trump had asked him to end a probe into former National Security Adviser Michael Flynn’s ties with Russia set off alarm bells.
The developments came in a tumultuous week at the White House after Trump fired Comey and reportedly disclosed some classified information to Russia’s foreign minister, fueling a controversy.
As Trump and his aides try to contain the political scandal, there are doubts if the president will be able to follow through on his promises for tax cuts, deregulation and fiscal stimulus.
Those pledges had helped fuel a record-setting post-election rally on Wall Street.
Selling accelerated late in the afternoon on Wednesday, which turned out to be one of the busiest trading days in months, with the benchmark indexes finishing near the day’s lows.
“We’ve seen the Trump agenda derailed and try to get back on track several times. It’s registering with more investors that its going to be hard to get back on track with the latest allegations,” Michael O’Rourke, chief market strategist at JonesTrading in Greenwich, Connecticut, told Reuters.
“Prior to the election investors expected Trump to represent uncertainty,” he said. “The market is now recognizing that some of the fears they had back in October are coming to fruition.”
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