Stocks Close Sharply Lower Amid Ongoing Political Turmoil - U.S. Commentary

(RTTNews) - Following the lackluster performance seen in the previous session, stocks moved substantially lower during trading on Wednesday. With the steep drop on the day, the tech-heavy Nasdaq pulled back well off yesterday's record closing high.

The major averages saw further downside going into the close, ending the session near their worst levels of the day. The Dow tumbled 372.82 points or 1.8 percent to 20,606.93, the Nasdaq plunged 158.63 points or 2.6 percent to 6,011.24 and the S&P 500 slumped 43.64 points or 1.8 percent to 2,357.03.

The sell-off on Wall Street came as ongoing political turmoil in Washington further offset optimism about President Donald Trump's ability to implement tax reform and deregulation.

In the latest headache for the White House, reports claim Trump asked former FBI Director James Comey to quash an investigation of former National Security Adviser Michael Flynn.

A report from the New York Times cited a memo Comey purportedly wrote shortly after an Oval Office meeting he had with Trump in February.

The White House has denied the report, saying, "The president has never asked Mr. Comey or anyone else to end any investigation, including any investigation involving General Flynn."

The latest developments come on the heels of the uproar over Trump's firing of Comey as well as claims the president revealed highly classified information to Russian officials.

Among individual stocks, shares of American Eagle Outfitters (AEO) moved sharply lower after the apparel retailer reported weaker than expected first quarter earnings and provided disappointing guidance.

Fellow apparel retailer Urban Outfitters (URBN) also posted a notable loss after reporting first quarter results that came in below analyst estimates.

On the other hand, shares of Red Robin Gourmet Burgers (RRGB) spiked higher after the restaurant chain reported better than expected first quarter results and provided upbeat guidance.

Sector News

Financial stocks showed a substantial move to the downside on the day amid concerns about the outlook for President Trump's policy agenda.

Reflecting the weakness in the financial sector, the Dow Jones Banks Index and the NYSE Arca Broker/Dealer Index tumbled by 4 percent and 4.3 percent, respectively.

Considerable weakness was also visible among semiconductor stocks, with the Philadelphia Oil Service Index slumping by 4.4 percent. The index pulled back off its best closing level in over sixteen years.

Cypress Semiconductor (CY), Integrated Device Technology (IDTI), and Silicon Labs (SLAB) turned in some of the semiconductor sector's worst performances.

Internet, transportation, computer hardware, and biotechnology stocks also saw significant weakness, moving lower along with most of the other major sectors.

Meanwhile, gold stocks bucked the downtrend, driving the NYSE Arca Gold Bugs Index up by 1.4 percent. The strength came as gold for June delivery jumped $22.30 to $1,258.70 an ounce.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved to the downside during trading on Wednesday. Japan's Nikkei 225 Index slid by 0.5 percent, while China's Shanghai Composite Index fell by 0.3 percent.

The major European markets also came under pressure on the day. While the U.K.'s FTSE 100 Index dropped by 0.3 percent, the German DAX Index tumbled by 1.4 and the French CAC 40 Index plunged by 1.6 percent.

In the bond market, treasuries moved sharply higher, benefiting from their appeal as a safe haven. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, tumbled by 11.3 basis points to 2.216 percent.

Looking Ahead

Developments in Washington may continue to impact trading on Thursday, although reports on weekly jobless claims, Philadelphia-area manufacturing, and leading economic indicators may also attract attention.

Retailers Abercrombie & Fitch (ANF), Best Buy (BBY), Dollar Tree (DLTR) and Sears (SHLD) are also due to report their quarterly results before the start of trading on Thursday.