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US stocks slumped on Thursday amid new reports that President Donald Trump was being investigated for obstruction of justice, while investors also digested unexpectedly hawkish guidance from the Federal Reserve.
The tech-heavy Nasdaq Composite index was hit hardest, slipping by 0.8% at 1:29 p.m. ET. The S&P 500 lost 0.4%, while the Dow fell by 0.1%.
The biggest decliners in the tech sector included Alphabet/Google, which was downgraded by Canaccord Genuity, as well as eBay, Yahoo and Apple. All four fell more than 0.8%.
Equity weakness started in earnest Wednesday after the Fed announced a 25-basis-point interest-rate increase as expected but took a surprisingly hawkish stance on the pace of remaining hikes. The central bank also said it would shrink its $ 4.5 trillion balance sheet this year, despite recent data showing that inflation was lagging the Fed’s 2% target.
The Fed now faces a delicate balancing act as it attempts to reconcile flagging inflation with positive economic data like the US unemployment rate, which sits at its lowest in 16 years.
US stocks, which were starting to look immune to the myriad negative headlines surrounding Trump, finally seemed to react to the latest news about the ongoing FBI investigation into Russian meddling in last year’s election. Reports emerged Wednesday that investigators last month began seeking to learn whether Trump tried to interfere in the Russia investigation.
Obstruction of justice is a criminal and impeachable offense, and investors are clearly concerned that Trump will be unable to implement the proposed policies that have carried stocks higher since the election.
The weakness in tech stocks is the latest flare-up for a sector that has been responsible for a large portion of stock gains in recent months. The Nasdaq 100 index dropped by 3% over the two-day period that ended Monday, highlighting the fragility of a rally driven largely by a handful of high-flying mega-cap companies.
The stock sell-off is also being exacerbated by a broad decline in commodities, most notably continued losses in crude oil, which has slipped by nearly 5% over the past two days.
Further, Asian and European stocks were down in regular trading, also applying pressure to the US market.
Investing.com
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