Dow drops 274 points as Trump crisis grips Washington

Traders working on the floor of the New York Stock Exchange on Aug 17, 2017.
Traders working on the floor of the New York Stock Exchange on Aug 17, 2017.PHOTO: REUTERS

NEW YORK (REUTERS) - US stocks sold off on Thursday, with the S&P 500 recording its biggest daily percentage drop in three months as escalating worries about the Trump administration's ability to push through its economic agenda rattled investors.

The benchmark index also closed at its lowest level since July 11, with the day's move marking the first time since the Nov 8 election of two days with more than 1 per cent declines so close together. The index dropped 1.4 per cent last Thursday, as concern over a possible conflict between the United States and North Korea hit the market.

The falls mark a break from a period of low volatility and subdued moves. The S&P 500 has had just four 1 per cent declines this year.

Investors appeared to be losing faith in the Trump administration's ability to move forward with tax cuts and the rest of its domestic economic agenda, some strategists said. The latest cause for concern was speculation over the possible departure of National Economic Council director Gary Cohn.

"You've elected a Republican administration which should be good news for the market, good news for business, and they're getting precious little done. And you had a big rally based on that," said Stephen Massocca, senior vice president at Wedbush Securities in San Francisco.

With valuation levels considered high in many stocks, investors may be more prone to sell. "Anything can be an excuse," he said.

The market was also on edge after a van crashed into dozens of people in the center of Barcelona and Spanish media, citing police sources, said at least 13 people were killed. Police said the crash was viewed as a terror attack.

The Dow Jones Industrial Average ended down 274.14 points, or 1.24 per cent, to 21,750.73, the S&P 500 lost 38.1 points, or 1.54 per cent, to 2,430.01 and the Nasdaq Composite dropped 123.20 points, or 1.94 per cent, to 6,221.91.

Stocks began to lose ground early in the session, following the speculation about Cohn.

A White House official later said Cohn intends to remain in his position. After a short respite, the market continued to sell off and picked up the pace into the close. All 30 Dow stocks fell, along with all components of the S&P 100.

Speculation of Cohn's departure came a day after Trump disbanded two business councils, with several chief executives quitting in protest over his remarks on white nationalists.

Late on Thursday, the White House said Trump has abandoned plans to create an infrastructure advisory council, and S&P e-mini futures extended losses.

The S&P 500 was on pace for its worst back-to-back weeks since the election.

Disappointing corporate results also weighed. Shares of Dow component Cisco Systems fell 4 per cent a day after its results, while Wal-Mart was down 1.6 per cent after the retailer reported a drop in margins due to continued price cuts and e-commerce investments.

Small-cap stocks also sold off. The Russell 2000 index , a widely used gauge of small caps, closed below its 200-day moving average for the first time since June 2016.

Declining issues outnumbered advancing ones on the NYSE by a 4.55-to-1 ratio; on Nasdaq, a 3.89-to-1 ratio favored decliners.

The S&P 500 posted 49 new 52-week highs and 10 new lows; the Nasdaq Composite recorded 98 new highs and 85 new lows.

It was the seventh straight day in which the NYSE and Nasdaq had more stocks making new 52-week lows than highs, the longest stretch since Trump's election.