Wall Street stumbles after US Senate delays vote to repeal Obamacare
The tech-heavy Nasdaq led a broad Wall Street decline on Tuesday with stocks falling more sharply after a health care bill was delayed in the US Senate, raising fresh questions about President Donald Trump’s domestic agenda.
The benchmark S&P 500 posted its biggest one-day drop in about six weeks and closed at its lowest point since May 31.
Major indexes extended losses after US Senate Republican leader Mitch McConnell decided to put off a planned vote on a bill to dismantle the Affordable Care Act until after the Senate’s July 4 recess.
The health care legislation, which has encountered resistance from several Republicans, is the first plank of Trump’s domestic policy agenda, with investors eager for him to move onto his other plans including tax cuts, infrastructure spending and deregulation.
Promises for such domestic polices helped fuel a 13.1 per cent rise for the benchmark S&P 500 since Trump’s November 8 election.
“The market likes certainty, and now there’s uncertainty,“ said Peter Costa, president of trading firm Empire Executions in New York. ”What is this going to look like when this gets out of the next iteration? That uncertainty I think is just having people pause a little bit.“
“I also think that when the market gets to certain levels, any type of uncertainty, especially in anything that has to do with the administration, will have an adverse effect,” Costa said.
The Dow Jones Industrial Average fell 98.89 points, or 0.46 per cent, to 21,310.66, the S&P 500 lost 19.69 points, or 0.81 per cent, to 2,419.38 and the Nasdaq Composite dropped 100.53 points, or 1.61 per cent, to 6,146.62.
Big tech names weighed most heavily on the S&P 500. Google parent Alphabet fell 2.5 per cent after EU antitrust regulators hit the tech giant with a record US$2.7 billion fine.
The Nasdaq had its worst day since a tech sell-off on June 9 raised questions about the sector. On Tuesday, the tech sector pulled back 1.7 per cent. It remains the best-performing major group this year.
“There is some thinking that they ran up too quickly, and if there’s an excuse to sell then we get some traders come in and sell into that weakness,” said Bucky Hellwig, senior vice president at BB&T Wealth Management in Birmingham, Alabama.
The health care sector weakened after news of the vote delay, and ended down 0.9 per cent.
Financials were the only sector to end in positive territory, rising 0.5 per cent.
Data showed consumer confidence for June rose more than expected, which could bolster the Fed’s case for another rate hike this year.
Philadelphia Fed President Patrick Harker said the Fed rightly plans to raise rates once more this year, given recent inflation weakness is likely temporary.
US Federal Reserve Chair Janet Yellen said she does not believe there will be another financial crisis for at least as long as she lives, thanks largely to reforms of the banking system since the 2007-09 crash.
Investors are gearing up for second-quarter corporate earnings season after a strong first quarter, with the S&P 500 trading at nearly 18 times forward earnings estimates, well above its long-term average of 15 times.
“On an earnings basis, the market appears to be fully valued and we need to see fiscal policy, tax and regulatory reform, to drive GDP growth and then stock prices,” said Ernie Cecilia, chief investment officer of Bryn Mawr Trust in Bryn Mawr, Pennsylvania.