Wall Street ends modestly lower amid Russia probe

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An inquiry into Russia’s alleged meddling in the US election, as well as progress on a tax bill in Congress, took a toll on Wall Street that plunged on Friday.

Major indexes ended lower after an ABC News report that former national security adviser Michael Flynn was prepared to testify that before taking office President Donald Trump had directed him to make contact with Russians.

The benchmark S&P 500 was down as much as 1.6 percent following the report. Flynn pleaded guilty on Friday to lying to the FBI about contacts with Russia's ambassador.

The Senate news was the latest sign of progress for a tax bill being closely watched by investors, with hopes that significant corporate tax cuts will further fuel Wall Street’s record-setting rally.

/Reuters

“This Flynn thing threw everything for a loop. We had that still against the backdrop of tax reform,” said J.J. Kinahan, chief market strategist at TD Ameritrade in Chicago.

“We are at all-time highs so sometimes when you do get news that’s of a nature where people want to sell, it gets a little bit overdone,” Kinahan said.

The Dow Jones Industrial Average fell 40.76 points, or 0.17 percent, to 24,231.59, the S&P 500 lost 5.36 points, or 0.20 percent, to 2,642.22 and the Nasdaq Composite dropped 26.39 points, or 0.38 percent, to 6,847.59.

Steep sell-offs have been a rarity on Wall Street this year. The S&P 500 has closed down by at least 1 percent only four times in 2017.

With investors optimistic about some aspects of Trump’s domestic agenda, especially tax cuts, news involving his administration has periodically rattled markets. /VCG Photo

Progress with the tax legislation in the Senate had helped buoy stocks this week, as well as drive a rotation into those areas that seem poised to benefit from lower corporate taxes.

“We’ve kind of had a slow-growth economy in the last 18 to 24 months. The market piled into the faster-growing companies out there,” said Gary Bradshaw, portfolio manager at Hodges Capital in Dallas.

“Now we have an economy that’s accelerated in growth...A lot of the stocks that have been ignored in the last couple of years could become bargains,” Bradshaw said.

The S&P has rallied 18 percent this year, boosted by solid global economic data and strong US corporate earnings. But with investors optimistic about some aspects of Trump’s domestic agenda, especially tax cuts, news involving his administration has periodically rattled markets.

Wall Street forecasters have been hiking their outlooks for 2018 corporate profits on rising expectations that the proposed US tax overhaul, championed by President Donald Trump, will pass, giving a boost to companies’ bottom lines.

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Source(s): Reuters