Wall Street dips as tax cut progress limits Flynn worries
NEW YORK – Wall Street finished the week on a tumultuous note, with stocks tumbling after a former top aide to President Donald Trump pleaded guilty to lying to the FBI, and then bouncing back as a massive tax cut neared passage.
All three major indices declined, but ended well above session lows, boosted by statements by Senate Republican leaders that key tax-cut holdouts were falling into line following concessions. The dollar also briefly swooned but later recovered. The rocky session in New York came as bourses in Paris and Frankfurt dropped on worries about a strengthening euro and as oil prices gained.
US stocks opened in negative territory after record finishes on Thursday, but the losses deepened on news that Trump campaign aide and former White House National Security Advisor Michael Flynn pleaded guilty in the probe of possible collusion between the Trump campaign and Moscow. Leading news commentators said the Flynn developments bring the probe closer to Trump and his family. A tweet from leading ABC News reporter Brian Ross said Flynn was prepared to testify that as a candidate Trump “directed him to make contact with the Russians.”
But buyers soon returned to the stock market as more Republicans endorsed the tax cut. The Dow Jones Industrial Average finished the week down 0.2 percent at 24,231.59, recovering before the close from the session low after diving more than 350 points. It also closed out the best week of 2017 for the blue-chip index. The Flynn news was “a lot of noise that mattered little to the market,” said JJ Kinahan, chief market strategist at TD Ameritrade.
“The Flynn stuff, we’ve seen this in previous administrations. It tends to be very entertaining TV, but until something actually comes of it, the market usually discounts it unless it hurts the agenda,” he said. “This one looks like it may not.” Phil Davis of PSW Investments said, “As long as investors think tax cuts are going to be applied they won’t sell. The Republicans and the traders are in complete denial of what is happening.”
In contrast, the Eurasia Group, a political risk consultancy, said the tax proposal was in good shape, but that the Flynn plea was “the worst news yet from the Russia probe for Trump.” “This news will further weaken Trump politically outside his base and distract Congress, making it more difficult for him to advance his domestic priorities in 2018,” Eurasia Group said in an analysis. “We still believe tax reform is a done deal, but the cloud is darkening on further legislation.” In other markets, oil prices advanced in something of a delayed reaction to Thursday’s OPEC decision to extend production cuts.
Frankfurt stocks fell 1.3 percent and Paris 1.0 percent, buffeted by a strengthening euro in the wake of better economic data. Eurozone “equity markets are paying the price” for the area’s recovery, said David Madden, market analyst at CMC Markets UK. “Ultimately a stronger economy often translates into a stronger stock market, but for now the rally in the euro is holding them back” as current single currency valuations hurt the share prices of eurozone exporters.