Stocks, dollar sink as investors rethink 'Trump trade'

U.S. stocks and the dollar sold off and bond prices rallied on Wednesday as investors fled risky assets amid uncertainty about U.S. President Donald Trump's ability to deliver on tax and regulatory reform.

Reports that Trump asked then-FBI Director James Comey to end a probe into the former national security adviser have raised questions over whether Trump tried to interfere with a federal investigation.

U.S. stock market declines picked up in afternoon trading. The Dow Jones Industrial Average was down more than 300 points and the CBOE Volatility index .VIX - Wall Street's fear gauge - rose above the 14 level for the first time since April 21.

The S&P 500 was on track for its worst day since September. The dollar index .DXY has erased its post-election gains.

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7 stocks that have soared under Trump's presidency
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7 stocks that have soared under Trump's presidency

AMERIPRISE FINANCIAL (AMP)

Stocks related to the financial services industry continue to flourish during the Trump presidency. Ameriprise, an asset management company that has been around since 1894, is just one financial service enjoying the ride.

In fact, Ameriprise stocks are nudging up toward prices not seen since February 2015. As of March 10, the stock was at $133.56, less than $5 off from its all-time high of $138.26 set back in February 2015.

Ameriprise's stocks dwindled as low as $86.76 in the days preceding the election. The day after Trump's election, the stock soared to $102, a 17 percent increase. Since Trump moved into the White House, Ameriprise is among stocks that continue to rise.

Photographer: Ariana Lindquist/Bloomberg via Getty Images

APPLE (AAPL)

With cutting-edge high-tech products ranging from smartphones to smartwatches, it isn't any surprise that Apple has seen a steady but sometimes bumpy climb since its inception in 1976. The company traded at more than $130 per share in July 2015, but declining sales dropped its stock to just over $90 by May 2016.

Investor Warren Buffett's company, Berkshire Hathaway, made a $1.1 million investment into Apple shares in May 2016. But the real boost in Apple stock didn't come until after Trump took office in January of this year.

Apple shares were at $120 on Jan. 20. By March 1, they rocketed to an all-time high of $139.79, a more than 16 percent increase over that time period. Apple might or might not be a good investment now. So do your homework before you buy.

"Investors seeking to buy stocks at present should be certain that they can stay invested for the long term," Friedberg said. "Stocks are expensive in comparison with historical valuations, which implies that future growth in stock prices will likely be tepid for the next few years."

Read: How to Invest on a Budget

(Photo by Zhang Peng/LightRocket via Getty Images)

THE GEO GROUP (GEO)

On Aug. 18 of last year, the U.S. Department of Justice announced its intention to phase out use of privately operated prisons. Soon after, The GEO Group's stock dropped sharply. The company manages 104 detention and correctional facilities worldwide, with more than 87,500 beds among them.

Trump's election win on Nov. 8 reversed the stock's downward trend. By end of business on Nov. 9, GEO's stock jumped more than 21 percent. By the time Trump took office, The GEO Group's stock price was 23 percent higher than it was before the Aug. 18 announcement.

The stock hit an all-time high of $48.97 on Feb. 27, one day after Attorney General Jeffrey Sessions released a memorandum reversing the Aug. 18, 2016, order.

(Photo by John Moore/Getty Images)

GOODYEAR TIRE AND RUBBER (GT)

Although Goodyear Tire and Rubber stock isn't at an all-time high, it is flourishing under the Trump administration. The stock is the highest it has been since 1999.

Goodyear's stock price peaked at $75.75 on Jan. 1, 1998, the year Goodyear celebrated its 100-year anniversary in the tire business. In the days preceding the 2016 election, the company's stock was worth a mere $27.79 per share.

By the time Trump took office, share prices increased to $30.52. In the month that followed, Goodyear stock gained nearly 19 percent and traded as high as $36.29.

Related: President Donald Trump's Net Worth

REUTERS/Rick Wilking/File Photo 

HASBRO (HAS)

Hasbro has a record of making profits look like child's play. The company's stock continues to rise under the Trump administration, jumping to a record level.

The toy company started in 1923. First, it sold textile remnants. Then, it manufactured pencil boxes and other school supplies. In 2017, Hasbro has 5,000 employees working in more than 40 countries throughout the world. My Little Pony, Littlest Pet Shop and Transformers are some of the company's most-recognized and beloved toys.

Hasbro earned more than $5 billion in revenue in 2016. In the month after Trump assumed his role as president, Hasbro stock shot up nearly 18 percent. But that doesn't necessarily mean Hasbro — or any other rising stock — is a great buy simply because of its recent track record.

"Investors who may be looking to invest in stocks should do so if it makes sense in terms of their long-term financial situation and their goals," said Roger Wohlner, an Arlington Heights, Ill.-based financial writer and advisor. "Getting into the market only because stocks have done well in recent months is not a good idea. Timing the market is generally a bad approach that often ends poorly for smaller investors."

So before you start investing, make sure you steer clear of bad reasons to buy stocks.

REUTERS/Sandy Huffaker/File Photo

IDEXX LABORATORIES (IDXX)

IDEXX Laboratories provides cutting-edge veterinary diagnostic technology. The innovative company offers everything from portable X-rays for horses and other large animals to up-to-the-minute test results your vet can access via smartphone.

The stock has climbed steadily since Trump's election. In the weeks following the vote, IDEXX enjoyed a nice rise. On Jan. 4, the company joined the S&P 500. IDEXX stock continued trending upward after Trump stepped into office. The company rose above $147 per share by March 1, an increase of more than 23 percent since Inauguration Day.

(Photo by Ben McCanna/Portland Press Herald via Getty Images)

KIMBERLY-CLARK (KMB)

If you've blown your nose, diapered a baby or wiped up a spill with a paper towel, chances are you've used one of Kimberly-Clark's products. The company sells brands like Kleenex, Huggies and Scott in more than 175 countries worldwide.

Unlike many companies, Kimberly-Clark saw little change in stock prices after Trump's election. The $115.48 stock price of Nov. 8 moved little until Trump took office.

Within days of Trump's inauguration, though, KMB stock rose to $121.79. The stock continued to rise, resulting in a nearly 11 percent increase to $134.83 a month since the president took office.

Keep Reading: Smart and Stable Stocks to Invest in During the Trump Administration

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The news comes on the heels of a tumultuous week at the White House when Trump unexpectedly fired Comey and reportedly disclosed classified information to Russia's foreign minister about a planned Islamic State operation.

Optimism over pro-growth policies under Trump had driven a sharp rally in U.S. stocks after the Nov. 8 U.S. election.

"We're getting into stall mode because of the early expectations for the Trump presidency. It's all being put well on the back burner and even off the stove. It's kind of worrisome as it could take time to muddle through this," said Joseph Benanti, managing director, senior sales trader at Rosenblatt Securities in New York.

The Dow Jones Industrial Average .DJI was down 333.24 points, or 1.59 percent, to 20,646.51, the S&P 500 .SPX had lost 38.76 points, or 1.61 percent, to 2,361.91 and the Nasdaq Composite .IXIChad dropped 141.99 points, or 2.30 percent, to 6,027.88.

Both the Dow and S&P 500 fell below their 50-day moving averages for the first time since April 21.

While previous threats to Trump's plans have rattled investors, they had failed to cause any significant pull back in stocks. The VIX last week closed at 9.77, its lowest close since December 1993.

Bank stocks, which outperformed in the post-election rally, were the worst hit on Wednesday. The S&P 500 financial sector .SPSY tumbled more than 3 percent, led by losses in Bank of America (BAC.N) and JPMorgan (JPM.N).

At nearly 18 times forward earnings, the S&P 500 trades at a significant premium to its long-term average valuations of 15 times, according to Thomson Reuters data.

MSCI's gauge of stocks across the globe .MIWD00000PUS fell 1 percent, while European shares .FTEU3 ended down 1.4 percent.

Several money managers said they were not yet likely to change their portfolios as a result of the latest White House news.

"We aren't likely to make major changes. We are already well positioned, but we need to think about a more negative scenario re tax reform versus what we were previously thinking," said Edward Perkin, chief equity investment officer at Eaton Vance.

The dollar index, which tracks the U.S. currency against six peers and had scaled a 14-year peak of 103.82 on Jan. 3, fell 0.6 percent to its lowest level since Nov. 9, surrendering all of its "Trump bump" gains. The safe-haven Swiss franc hit six-month highs.

Prices of bonds, also seen as safe-haven assets, rallied.

Benchmark 10-year notes US10YT=RR were up 1 point in price to yield 2.21 percent.

In commodity markets, safe-haven gold XAU= hit a two-week high, while oil prices were higher. Spot gold rose for a fifth day and was up 1.8 percent at $1,258.38 an ounce.

Brent crude LCOc1 gained 1.1 percent to settle at $52.21 per barrel, while U.S. light crude CLc1 rose 0.8 percent to settle at $49.07.

(Additional reporting by Vikram Subhedar Marc Jones and John Geddie in London and Megan Davies and Sinead Carew in New York; Editing by Hugh Lawson and Nick Zieminski)

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Markets

DJIA 21,090.14 77.72 0.37%
NASDAQ 6,214.28 51.25 0.83%
S&P 500 2,416.62 12.23 0.51%
NIKKEI 225 19,813.13 70.15 0.36%
HANG SENG 25,630.78 202.28 0.80%
DAX 12,621.72 -21.15 -0.17%
USD (per EUR) 1.12 0.00 -0.26%
USD (per CHF) 0.97 0.00 0.08%
JPY (per USD) 111.82 0.30 0.27%
GBP (per USD) 1.29 0.00 -0.31%

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