Tag Archives: Tax Cuts

Wall Street sinks on fears of delays to Trump tax cuts

Traders work on the floor of the New York Stock Exchange (NYSE) shortly after the opening bell in New York, U.S., March 21, 2017. REUTERS/Lucas Jackson

By Noel Randewich

(Reuters) – Wall Street fell sharply on Tuesday as investors worried that President Donald Trump will struggle to deliver promised tax cuts that propelled the market to record highs in recent months, with nervousness deepening ahead of a key healthcare vote.

The S&P 500 and Dow Jones Industrial Average lost over 1 percent in their worst one-day performances since before Trump’s election victory in November.

The S&P financial index <.SPSY> sank 2.87 percent, its biggest daily fall since June. That added to losses in the sector since the Federal Reserve last week raised interest rates by 25 basis points and signaled it would remain on a gradual pace of hikes, a less aggressive stance than some investors expected.

Banks benefit from higher interest rates and their stocks are sensitive to changes in expectations of how quickly the Fed will adjust rates. Bank of America <BAC.N> slumped 5.77 percent, the biggest drag on the S&P 500, while a 3.72-percent drop in Goldman Sachs <GS.N> pulled the Dow lower.

“There was a feeling the Fed was going to possibly be more hawkish last week. That didn’t happen,” said Mark Kepner, managing director at Themis Trading in Chatham, New Jersey. “That takes a little out of the higher rates that the banks want.”

Republican party leaders aim to move controversial healthcare legislation to the House floor for debate as early as Thursday. But they can only afford to lose about 20 votes from Republican ranks, or risk the bill failing, since minority Democrats are united against it.

With valuations stretched, investors see the Trump administration’s struggles to push through the healthcare overhaul as a sign he may also face setbacks delivering promised corporate tax cuts. Expectations of those tax cuts are a major reason for the 10-percent surge in the S&P 500 since Trump’s election.

“The market is starting to get a little fed up with the lack of progress in healthcare because everything else is being put on the back burner,” said RJ Grant, head of trading at Keefe, Bruyette & Woods in New York.

The Russell 2000 <.RUT> index of smallcap stocks fell 2.71 percent, its worst day since September.

The financial sector has been the best performing of the 11 major S&P sectors since Trump’s election, surging 18 percent on his proposals to cut bank regulations and reduce taxes.

The Dow Jones Industrial Average <.DJI> dropped 1.14 percent to end at 20,668.01 points, while the S&P 500 <.SPX> lost 1.24 percent to 2,344.02.

The Nasdaq Composite <.IXIC> fell 1.83 percent to 5,793.83.

The CBOE Volatility index <.VIX>, Wall Street’s “fear gauge”, jumped 10 percent.

Under Trump, Wall Street has become unaccustomed to steep selloffs. The last time the S&P 500 lost 1 percent or more in a day was 110 trading sessions ago on October 11. Over the past two years, the S&P 500 has suffered losses of 1-percent or more about once every 11 sessions, according to Thomson Reuters data.

But investors have grown worried about elevated valuations. The S&P 500 is trading at about 18 times forward earnings estimates against the long-term average of 15, according to Thomson Reuters data.

Shares of FedEx Corp <FDX.N> dropped 3 percent in extended trade after the delivery company’s quarterly report disappointed investors.

Declining issues outnumbered advancing ones on the NYSE by a 3.92-to-1 ratio; on Nasdaq, a 5.25-to-1 ratio favored decliners.

The S&P 500 posted 27 new 52-week highs and 7 new lows; the Nasdaq Composite recorded 78 new highs and 79 new lows.

About 8.3 billion shares changed hands in U.S. exchanges, compared with the 7.1 billion daily average over the last 20 sessions.

(Additional reporting by Chuck Mikolajczak and Sinead Carew in New York, editing by Nick Zieminski)

Trump vows military build-up, hammers nationalist themes

U.S. President Donald Trump addresses the American Conservative Union's annual Conservative Political Action Conference (CPAC) in National Harbor, Maryland. U.S., February 24, 2017. REUTERS/Kevin Lamarque

By Emily Stephenson and Steve Holland

NATIONAL HARBOR, Md./WASHINGTON (Reuters) – President Donald Trump said he would make a massive budget request for one of the “greatest military buildups in American history” on Friday in a feisty, campaign-style speech extolling robust nationalism to eager conservative activists.

Trump used remarks to the Conservative Political Action Conference (CPAC), an organization that gave him one of his first platforms in his improbable journey to the U.S. presidency, to defend his unabashed “America first” policies.

Ahead of a nationally televised speech to Congress on Tuesday, Trump outlined plans for strengthening the U.S. military, already the world’s most powerful fighting force, and other initiatives such as tax reform and regulatory rollback.

He offered few specifics on any initiatives, including the budget request that is likely to face a harsh reality on Capitol Hill: At a time when he wants to slash taxes for Americans, funding a major military buildup without spending cuts elsewhere would add substantially to the U.S. budget deficit.

Trump said he would aim to upgrade the military in both offensive and defensive capabilities, with a massive spending request to Congress that would make the country’s defense “bigger and better and stronger than ever before.”

“And, hopefully, we’ll never have to use it, but nobody is going to mess with us. Nobody. It will be one of the greatest military buildups in American history,” Trump said.

Appealing to people on welfare to go to work and pledging to follow through on his vow to build a wall on the U.S.-Mexican border, Trump drew rounds of applause from the large gathering of conservatives, many of them wearing hats emblazoned with the president’s campaign slogan, “Make America Great Again.”

His speech was heavy on the nationalist overtones from his campaign last year, focusing on promises to boost U.S. economic growth by retooling international trade deals, cracking down on immigration and boosting energy production.

ROCKY FIRST MONTH

Trump is looking to put behind him a rocky first month in office. An executive order he signed aimed at banning U.S. entry by people from seven Muslim-majority countries became embroiled in the courts and he had to fire his national security adviser, Michael Flynn, for Russian contacts before Trump took office.

With the federal budget still running a large deficit, Trump will have to fight to get higher military spending through Congress. In his speech, he complained about spending caps put in place on the defense budget dating back to 2011.

He also heaped criticism on what he called purveyors of “fake news,” seeking to clarify a recent tweet in which he said some in the U.S. news media should be considered an “enemy of the people.”

He said his main beef was the media’s use of anonymous sources. “They shouldn’t be allowed to use sources unless they use somebody’s name. Let their name be out there,” Trump said.

His comments came on the same day CNN reported that White House Chief of Staff Reince Priebus asked FBI Deputy Director Andrew McCabe to deny a Feb. 14 report in the New York Times that said Trump’s presidential campaign advisers had been in frequent contact with Russian intelligence officers. The request came after McCabe told him privately the report was wrong.

A senior administration official said on Friday that FBI Director James Comey told Priebus later that the story was not accurate. Priebus asked if the Federal Bureau of Investigation could set the record straight, but Comey said the bureau could not comment, the official said.

Trump has repeatedly chosen to make news media criticism a focus of his public remarks since taking office on Jan. 20.

The speech allowed Trump to put his stamp firmly on the conservative political movement, even as some activists fretted that his immigration and trade policies go too far.

With Trump in the White House and Republicans holding majorities in both houses of Congress, CPAC and the thousands of conservative activists who flock to the event each year from across the country are seeing their political influence rising.

(Additional reporting by Richard Cowan; Editing by Kevin Drawbaugh and Jonathan Oatis)