U.S. equities kicked off Wednesday’s session sharply lower as investors fretted over the latest news coming out of Washington.
The Dow Jones industrial average opened 176 points lower, with Goldman Sachs contributing the most losses. The S&P 500 dropped 0.75 percent, with financials tumbling 1.55 percent to lead decliners. The Nasdaq composite lagged, shedding nearly 1 percent.
NBC News confirmed Tuesday a report from The New York Times that former FBI Director James Comey put together a memo outlining a conversation in which President Donald Trump allegedly asked him to halt an investigation into Michael Flynn, the former national security adviser.
Later on Tuesday, House Oversight Committee Chairman Jason Chaffetz asked the FBI for any records it has on communications between Trump and Comey.
The news sent stock futures lower, with Dow futures dropping more than 150 points. Traditional safe havens, in turn, caught a bid as the benchmark 10-year yield fell to about 2.25 percent. The yen also rose against the dollar to trade at 111.84.
“If special prosecutors are hired or there is more talk about obstruction of justice being an impeachable offense, one can kiss the tax plan, health care plan, and fiscal stimulus plan goodbye for 2017,” Andy Brenner, head of international fixed income securities at National Alliance Securities, said in a note Monday.
Stocks have rallied all year in part because of the hope for lower corporate taxes. Lately, the major indexes have pushed towards record levels, with the S&P and Nasdaq notching all-time highs earlier this week.
But equities would take a big hit if Trump were impeached, Jack Welch, the former CEO of General Electric who has the president’s ear, told CNBC on Wednesday. “An impeachment proceeding would blow the market away,” Welch said on “Squawk Box.”
The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, jumped nearly 20 percent Wednesday, lifting it to its highest level since April 21.
The risk to the Trump agenda also presents a problem for the Federal Reserve, said Larry McDonald, author of The Bear Traps Report and head of global strategy at ACG Analytics.
“Wall St’s calling for 2-3 more rate hikes this year, seven over the next two years – but Mr. DXY says no way Jose. The FOMC could very well be on Hold for the Rest of 2017,” McDonald said in a note.
The dollar index (DXY), which measures the U.S. currency’s performance against six other currencies, fell 0.23 percent to 97.88, near its lowest level since November.
The Fed has signaled it intends to raise rates twice more this year, after a quarter-point hike in March. The central bank’s policymaking committee is slated to meet next month. Market expectations for June rate hike are 69.2 percent, according to the CME Group’s FedWatch tool.
—CNBC’s Christine Wang, Jacob Pramuk and Patti Domm contributed to this report.
On tap later this week:
8:30 a.m. Initial claims
8:30 a.m. Philadelphia Fed survey
1:00 p.m. Cleveland Fed President Loretta Mester
9:15 a.m. St. Louis Fed President James Bullard