Wall Street makes worst start this year in wake of Trump comments

Wall Street's main indexes on Thursday got off to their worst start this year after Donald Trump gave little clarity on his promises for economic growth that had powered a record-breaking rally on Wall Street for two months.

The US president-elect, in his first news conference on Wednesday, gave no details on tax cuts or infrastructure spending, and instead lashed out at US spy agencies and news agencies over what he called a ‘phony’ Russia dossier. He also blasted pharmaceutical companies over high drug prices, causing health stocks to snap a six-day winning streak and a wobble in Wall Street.

“The indices are trading lower as investors rethink yesterday’s Trump press conference,” said Peter Cardillo, chief market economist at First Standard Financial in New York.

“The fact that there was no mention of fiscal policy is weighing on the greenback this morning (and) causing a cautious mood in the equity arena.”

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In early trade, the Dow Jones Industrial Average was down 85.36 points, or 0.43 per cent, at 19,868.92, the S&P 500 was down 8.55 points, or 0.38 per cent, at 2,266.77 and the Nasdaq Composite was down 26.91 points, or 0.48 per cent, at 5,536.74. The three indexes experienced their biggest one-day drop since December 30th.

Major sectors

Ten of the 11 major S&P 500 sectors were lower, with the technology, financial and industrial sectors all down 0.5 per cent or more. The energy sector was the only one with gains, boosted by a more-than-2 per cent rise in oil prices. The dollar recovered slightly, but continued to trade close to a one-month low. Prices of safe-haven gold rose to their highest since late November.

European shares have also fallen, bucking gains in Asia overnight and weighed down by a 2 per cent slump in healthcare stocks after Mr Trump had said pharmaceutical firms had been “getting away with murder” with their prices. They weren’t being helped either by a deck of stronger currencies.

The Iseq, which is not heavy in pharmaceutical stocks, went against the trend, rising by just less than 0.2 per cent. In London meanwhile, the FTSE drew some strength from positive Christmas earnings reports from UK retailers including Marks & Spencer and Tesco.

The euro was back at $1.0670 for the first time in a month, shaky sterling climbed towards $1.23 and Sweden’s crown hit a four-month high and cracked its 200-day moving average against the euro after pacy inflation data.

It was bliss for bond markets that have been under the cosh since Mr Trump’s election fuelled bets on higher US interest rates that tend to set the bar for global borrowing costs.

Bonds

Euro zone bond yields fell 2 to 6 basis points as German bunds made ground and US ten-year Treasury yields fell to their lowest level in more than a month at around 2.3 per cent before a Federal Reserve policymaker nudged them back up.

“The economy is displaying considerable strength,” Philadelphia Fed president Patrick Harker said in Pennsylvania.

“I see three modest hikes as appropriate for the coming year, assuming the economy stays on track.”

- (PA/Reuters/Bloomberg)