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Wall Street falls on concerns over Trump’s pro-growth policy

Aug. 17, 2017

U.S stocks were lower in choppy trading on Thursday as investors worried about President Donald Trump’s ability to pursue his pro-growth policies.

Mr. Trump disbanded two business councils on Wednesday after several chief executives quit in protest over his remarks on white nationalists.

Stocks had hit session lows before paring losses after Axios reporter Jonathan Swan tweeted, citing a source with direct knowledge, that rumours around the resignation of Gary Cohn, director of National Economic Council, is “100 (percent) false.”

A White House official said Mr. Cohn “intends to remain in his position as NEC director ... nothing’s changed.”

“The concern would be if Gary Cohn would decide that if he needs to take a safe step that a lot of CEOs did, it will be very difficult to move forward with pro-growth tax reforms,” said Art Hogan, chief market strategist at Wunderlich Securities.

The Dow Jones Industrial Average was down 142.3 points, or 0.65 per cent, at 21,882.60 and the S&P 500 was down 19.73 points, or 0.8 per cent, to 2,448.38.

The Nasdaq Composite was down 68.65 points, or 1.08 per cent, to 6,276.46.

Investors have also been assessing minutes from the Federal Reserve’s July meeting that showed growing concerns over weak inflation, muddying the path of interest rate hikes.

Weak inflation has spurred concerns that the Fed may have to cool its monetary tightening pace even though the economy is growing moderately and the unemployment rate is at a 16-year low.

The central bank is also considering reducing its $4.2-trillion portfolio of Treasury bonds and mortgage-backed securities.

“If they don’t start selling their asset portfolio in September, which is what they have indicated, that will be a negative signal to the markets,” said Brad McMillan, chief investment officer for Commonwealth Financial Network in Waltham, Mass.

“The Fed is still fairly comfortable with the economics, but they’re getting more concerned about the politics.”

Nine of the 11 major S&P sectors were lower, with technology index’s 0.93-per-cent fall topping the list.

Cisco fell 3.5 per cent after reporting a revenue miss in its closely-watched security business.

Wal-Mart was down 1.7 per cent after the retailer reported a drop in margins due to continued price cuts and investments in its e-commerce operations.

Canada’s main stock index edged higher on Thursday, as declines in mining stocks partly offset gains for several heavyweight banks and a jump in shares of Valeant Pharmaceuticals International Inc.

Valeant climbed 4.1 per cent to $18.63 after the company said it had resolved the concerns of U.S. authorities about its Bausch + Lomb facility in Tampa.

Big banks also gained, helping the financials group add 0.2 per cent overall. Royal Bank of Canada rose 0.3 per cent to $93.22, and Toronto-Dominion Bank added 0.3 per cent to $64.14.

At 11:16 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 20.82 points, or 0.14 per cent, to 15,103.03.

Nine of its 10 main groups were higher, with advancers outnumbering decliners by 1.4-to-1.

The materials group, which includes precious and base metals miners and fertilizer companies, lost 0.3 per cent.

Fertilizer company Potash Corp of Saskatchewan Inc declined 0.9 per cent to $22.11, and diversified miner Teck Resources Ltd fell 1.2 per cent to $29.40.

Among raw materials mined by Teck is copper, whose price in global markets fell 0.6 per cent to $6,494.50 a tonne.

It also excavates zinc, whose price retreated 0.9 percent to $3,092.50 a tonne. Earlier in the session it touched its highest level since October 2007.

First Quantum Minerals Ltd, another base metal miner, fell 1.5 per cent to $13.21.

The energy group gained 0.2 per cent as oil prices steadied after U.S. data showed a big fall in crude stockpiles but also an increase in production.

Prometic Life Sciences Inc declined 5.6 per cent to $1.18, adding to a string of daily declines since reporting revenue that sharply missed expectations last week.

Oil prices rose on Thursday on expectations of a hefty stockpile draw at the U.S. oil storage hub at Cushing, Okla., reversing the previous day’s loses spurred by data showing U.S. crude output at its highest in two years.

Inventories at Cushing, the delivery hub for U.S. crude futures, declined more than a million barrels in the week to Aug. 15, traders said citing estimates from energy industry information provider Genscape.

In the latest week to Aug. 11 for which government data was available, Cushing inventories increased nearly 700,000 barrels.

Inventories in the U.S. are closely watched as the market grapples with a global supply glut.

Brent crude was up 50 cents, or 1 per cent at $50.77 a barrel. U.S. light crude was 20 cents, or 0.4 per cent, higher at $46.98 a barrel.

Both benchmarks fell more than 1 per cent on Wednesday despite data showing that U.S. inventories last week fell the most in nearly a year.

Energy Information Administration (EIA) data showed commercial U.S. crude stockshave fallen by almost 13 per cent from their peaks in March to 466.5 million barrels. Stocks are now lower than in 2016.

U.S. oil output, however, is rising fast as shale producers take advantage of a recent increase in prices.

U.S. crude production rose 79,000 barrels per day (bpd) to over 9.5 million bpd last week, its highest level since July 2015, and 12.8 per cent above the most recent low in mid-2016.

“Yesterday, the production number trumped the storage number, but it was still a draw of 9 million,” said Bob Yawger, director of energy futures, energy futures at Mizuho. “There are some weaker shorts that are probably sold out and they want to get out.”

Rising U.S. output has been undermining efforts by the Organization of the Petroleum Exporting Countries and other producers including Russia to drain a global fuel glut.

They have promised to restrict output by a total of 1.8 million bpd between January this year and March 2018.

William O’Loughlin at Rivkin Securities said that if inventory declines continued at the current pace, U.S. stocks would fall below the five-year average in two months.

“The pace of the declines indicates that OPEC production cuts are having an effect, although the current oil price suggests that the market is skeptical about the longer-term prospects for rebalancing of the oil market,” he added.

Brent prices are down almost 12 per cent since OPEC and its allies began cutting production in January.

https://www.theglobeandmail.com/globe-investor/inside-the-market/market-updates/at-midday-energy-stocks-lift-tsx-slightly-higher/article36011653/