Wall Street drops on Trump's threats of govt shutdown, Nafta end

US President Donald Trump also said he might scrap the North American Free Trade Agreement with Mexico and Canada to jumpstart negotiations.
US President Donald Trump also said he might scrap the North American Free Trade Agreement with Mexico and Canada to jumpstart negotiations.PHOTO: AFP

NEW YORK (Reuters) - US stocks opened sharply lower on Wednesday (Aug 23), giving back some gains from a day earlier, after President Donald Trump warned of a government shutdown to build the Mexico border wall and also threatened to scrap a trade agreement with Mexico and Canada.

"If we have to close down our government, we're building that wall," Mr Trump said at a rally in Phoenix, Arizona, on Tuesday evening.

The comments came as lawmakers face a late-September deadline to raise the United States debt ceiling or risk a default, and hours after a lawmaker said there was "zero chance" of the US not raising the ceiling.

Mr Trump also said he might scrap the North American Free Trade Agreement (Nafta) with Mexico and Canada to jump-start negotiations.

The first round of talks ended on Sunday, with the aim to revamp Nafta by early 2018.

Investors have grown increasingly concerned about Mr Trump's ability to legislate his pro-growth agenda, especially those of tax cuts and infrastructure spending, given the near-constant political rumblings in the White House.

"The pullback is from the pretty strong words out of the President... (his) comments on Nafta, which bring up a question of a global trade war, is weighing," said Mr Peter Cardillo, chief market economist at First Standard Financial in New York.

"You can have a tax cut, but if you have a trade war, that is going to impact the economic growth," he said.

At 1.42pm GMT, the Dow Jones Industrial Average was down 77.83 points, or 0.36 per cent, at 21,822.06 and the S&P 500 was down 8.3 points, or 0.34 per cent, at 2,444.21.

The Nasdaq Composite was down 21.88 points, or 0.35 per cent, at 6,275.60.

Investors are also jittery ahead of the annual gathering of global central bankers in Jackson Hole, Wyoming, where Federal Reserve chair Janet Yellen's Friday speech will be scrutinised for clues on the central bank's stand on monetary policy.

Nine of the 11 major S&P indexes were lower, with Consumer Discretionary Index's 0.6 per cent fall leading the decliners.

Lowe's 4.7 per cent fall weighed the most on the S&P after the company reported a lower-than-expected profit and cut its margins forecast.

Bigger rival Home Depot dropped 1.34 per cent, weighing the most on the Dow.

Shares of advertising firm Omnicom dropped nearly 5 per cent, while Interpublic Group fell 4.3 per cent after WPP cut its sales forecast for the second time in six months. WPP'S US-listed shares sank 11.2 per cent.

Declining issues outnumbered advancers on the NYSE by 1,793 to 715.

On the Nasdaq, 1,646 issues fell and 671 advanced.