Stocks sink early on Washington worries before paring losses
Worries that Washington may not be able to help businesses as much as once thought knocked stock indexes down hard early Monday, but they clawed back most of their losses and ended the day mixed.
The Standard & Poor’s 500 index fell 2.39 points, or 0.1%, to 2,341.59 for its seventh drop in the last eight days. The Dow Jones industrial average sank 45.74, or 0.2%, to 20,550.98, while the Nasdaq composite index rose 11.64, or 0.2%, to 5,840.37.
When trading opened for the day, it looked as if losses would be much worse. The S&P 500 sank from the start and was down as much as 0.9%.
The weakness followed last week’s failure by Republicans to repeal the Affordable Care Act, something they’ve been pledging to do for years, which raised doubts that Republicans can push through promises to help businesses. Investors have been anticipating that President Trump and the Republican-led Congress will cut taxes, loosen regulations for companies and institute other corporate-friendly policies.
Indexes recovered most of their losses in the afternoon, largely thanks to gains in hospital and other healthcare stocks. Tax cuts, deregulation and other business-friendly moves could still happen, but even if they don’t, the stock market has several pillars of support, said John Manley, chief equity strategist at Wells Fargo Funds Management.
“Trump lucked out when he got elected president, because it was just as earnings were coming out of a two-year slumber,” he said. “I think it’s been as much, if not more, about earnings as it’s been him” behind the 9.4% rise for the S&P 500 since election day.
An improving economy is translating into bigger profits for businesses, which are set to report their first-quarter results in coming weeks. The Federal Reserve, meanwhile, is moving very slowly in raising interest rates and is loath to apply the brakes to the economy too quickly.
“Investors have to acknowledge that a 5% correction can happen at any time, and the fact that we haven’t had a 1% down day for so long is extraordinary,” Manley said. “But the things that are usually responsible for a major market decline just don’t seem to be in place.”
The S&P 500 has lost 1% in a day just once since mid-October.
Interest rates fell Monday. The yield on the 10-year Treasury dropped to 2.37% from 2.41% late Friday. Just a couple weeks ago, it was above 2.60%.
Bank stocks have tracked the movements of Treasury yields recently, because higher interest rates would allow them to charge more for loans and reap bigger profits. Investors also expected financial companies to be some of the biggest beneficiaries of easier regulations with a Republican-led White House.
Financial stocks in the S&P 500 dropped 0.5%, one of the larger losses among the 11 sectors that make up the index. Morgan Stanley fell 88 cents, or 2.1%, to $41.58, and Capital One Financial lost $1.67, or 2%, to $82.13.
Hospital stocks were among the strongest performers. The Republican healthcare plan would have resulted in 24 million additional uninsured people in a decade, according to a tally by the Congressional Budget Office. And hospitals take care of patients, whether they’re insured or not.
HCA Holdings jumped $4.45, or 5.2%, to $90.49 for the biggest gain in the S&P 500. Universal Health Services rose $4.08, or 3.3%, to $125.97.
The price of gold rose $7.20 to settle at $1,255.70 an ounce. Silver rose 36 cents to $18.11 per ounce. Copper was close to flat at $2.63 per pound.
Benchmark U.S. crude fell 24 cents to settle at $47.73 per barrel. Brent crude, used to price international oils, fell 5 cents to $50.57 a barrel.
The dollar fell to 110.57 Japanese yen from 110.80 late Friday. The euro rose to $1.0868 from $1.0808, and the British pound rose to $1.2566 from $1.2500.
Stocks were weak around the world. In Asia, Japan’s Nikkei 225 index dropped 1.4%, South Korea’s Kospi index lost 0.6% and the Hang Seng in Hong Kong fell 0.7%. In Europe, the German DAX lost 0.6%, the French CAC 40 fell 0.1% and the FTSE 100 in London dropped 0.6%.
9:25 a.m.: This article was updated with market prices and context.
1:05 p.m.: This article was updated with the market climbing back from morning losses.
2:25 p.m.: This article was updated with the close of trading.
This article was originally published at 7:10 a.m.
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