Markets fret as Trump agenda shows signs of cracks

Wed Mar 22, 2017 5:07am EDT
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By Rodrigo Campos

NEW YORK (Reuters) - The steepest pullback in stocks since the U.S. presidential election reveals investor angst about President Donald Trump's ability to push through major reforms, leaving stocks vulnerable to a long-anticipated correction.

The S&P 500, in its second longest bull market ever, has risen close to 10 percent since the Nov. 8 election on optimism about Trump's pro-growth agenda. With valuations at their highest in over a decade, investors have been expecting a pullback even if its catalysts haven't been clear.

Trump, looking to score the first major political win of his presidency, on Tuesday warned Republican lawmakers that if a healthcare bill he backs fails to pass, it would cause "political problems." Stocks fell alongside the U.S. dollar, while Treasuries and gold rallied.

"It's like the Trump agenda getting kind of slapped in the face," said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia.

Investors saw the health bill vote, expected on Thursday, as testing optimism that the Trump administration and Republican leaders will implement tax cuts, deregulation and infrastructure spending expected to boost economic growth.

The muddled view on the healthcare bill "carries over to what will happen with the infrastructure plan and the tax reform plan and the reduced regulation plan," Tuz said.

Adding to the angst, FBI Director James Comey on Monday confirmed that the bureau is investigating possible ties between Trump's presidential campaign and Russia as Moscow sought to influence the 2016 U.S. election. The investigation, he said, could last for months.

Comey's testimony "pointed to the fact that there could be a lot of drawn-out political infighting that could delay some of the pro-business ideas from being passed," said Rick Meckler, president of LibertyView Capital Management in Jersey City, New Jersey.   Continued...

Traders work on the floor of the New York Stock Exchange (NYSE) shortly after the opening bell in New York, U.S., March 20, 2017. REUTERS/Lucas Jackson