Wall Street Tumbles Due to Lack of Progress with Trump’s Policies

Wall Street took a nosedive on Tuesday due to concerns that President Donald Trump will be unable to achieve his campaign promise of tax cuts. The DJIA lost 1.14% to fall at 20,668.01 points while the S&P index lost 1.24% to fall to 2344.02.

The stock market went to record highs after his victory because of his planned expansionary economic policies. The S&P 500 surged by 10% ever since Trump became president because of expectations of tax cuts under the Trump administration. According to Thomson Reuters, the last time S&P fell by more than 1% in one session was October 11 which was 110 trading sessions ago.

The last time the S&P 500 lost 1 percent or more in a day was 110 trading sessions ago on Oct. 11. In contrast, 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.

Both the Dow Jones and S&P 500 lost more than 1% which is their worst performance since Donald Trump got elected last November. The Russell 2000 index of small cap stocks dropped by 2.71%. Also, Wall’s Street fear meter, the CBOE Volatility Index, went up by 10%.

There is also an upcoming vote on healthcare that got investors jittery as there is significant opposition to it. RJ Grant, head trader at Keefe, Bruyette & Woods said, “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.”

With such difficulty with the healthcare act, Trump is likely to face challenges in pushing for his expansionary tax reforms. Goldman Sachs in one of its note to clients said, “We expect the health care bill to pass the House this week, but we believe Senate passage next week will be much more difficult, and that a bill will not reach the President’s desk before May, delaying the start of the tax reform process somewhat.”

SPSY, S&P’s financial index, dropped by 2.87% which was mainly due to the less hawkish stance of the Fed. The Fed only raised interest rates by 25 basis points last week. It has also indicated the pace of the hikes will be gradual. As such, banks which benefit from higher interest rates went crashing. Bank of America dropped 5.77% while Goldman Sachs dragged the Dow by going down by 3.72%.

Mark Kepner, managing director at Themis Trading said, “There was a feeling the Fed was going to possibly be more hawkish last week. That didn’t happen. That takes a little out of the higher rates that the banks want. The Banking sector has surged 18% ever since Trump’s election as he promised to lessen bank regulations and provide tax cuts.

Investors are also concerned with the valuations of Wall Street. According to Thomson Reuters, the S&P index is trading 18x its forward earnings estimates. The average long-term average of the S&P index is 15.