Dow suffers worst loss of '17 amid Trump border angst
The 'Trump Trade' might not be invincible after all.
On Monday, Wall Street started to account for political and policy risk for the first time in the Trump era, with the Dow suffering its biggest point drop since the election amid fallout stemming from President Trump's order to clamp down on immigration from seven Middle East countries with Muslim-majority populations.
"This is not a positive story for the markets," says Gregory Valliere, chief global strategist at Horizon Investments.
Since Trump's Nov. 8 election, Wall Street has been driving stocks higher on Trump's business-focused agenda, which include cutting corporate taxes, slashing regulations and ramping up fiscal spending.
But Monday's trading action signals that investors are concerned about some of Trump's other policies, which include his views on immigration and a protectionist stance on global trade.
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The Dow Jones industrial average, which was down nearly 224 points at its session low Monday, closed down 122.65 points, or 0.6%, to 19,971.13. It was the blue-chip stock gauge's worst point loss of 2017 and its biggest since a 200.38-point fall on Oct. 11.
Other major U.S. stock indexes also fell, but finished the day off their lows. The Standard & Poor's 500 fell 0.6% to 2280.90 and the Nasdaq lost 0.8%.
The lousy start to the week comes after the Dow topped 20,000 for the first time last Wednesday. The selloff also occurred ahead of a busy week of earnings results from Corporate America, the Federal Reserve's first policy meeting of 2017 and the final look at the employment market in 2016 when the December jobs report is released Friday.
Much of the angst on Wall Street comes from Trump's executive order signed Friday that placed a 90-day ban on travel to the U.S. by citizens of Iraq, Syria, Iran, Sudan, Libya, Somalia and Yemen. It also imposed a 120-day suspension of the U.S. refugee program and blocked Syrians from entry indefinitely. The move triggered protests and confusion at U.S. airports over the weekend.
Trump's travel ban also caused a sharp spike in market uncertainty, as investors tried to handicap the fallout of a less-open U.S. border on key sectors of the economy, such as technology, Wall Street also wondered whether sealing off the U.S. border to certain people would ultimately trigger wider concerns over global trade and the free movement of educated workers.
"We are not saying all this divisiveness will cause problems for the market; we are just saying it is something to watch," says Gary Kaltbaum, president of Kaltbaum Capital Management.
Wall Street fears the border flap and others like it will steer Trump's focus away from more market-friendly policies.
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The immigration flap is taking the market's focus off of the "one issue that matters to Wall Street most -- tax reform," says Valliere. It's also creating worry that changes to the tax code might not be "on the front burner" and could "get delayed amid the furor over immigration," he adds.
Border wars could also hurt U.S. competitiveness, some money managers fear.
Longer-term, Trump's immigration ban could send the message that "highly skilled workers from abroad ... aren't welcomed," says Axel Merk, chief investment officer at Merk Investments. "The U.S. is at risk of losing the fight for the best and brightest."
The controversy over Trump's immigration policy has at least one market pro urging caution.
"The maelstrom our president has unleashed over immigration ... is yet another reason to honor our ... cautionary stance in the near-term," Jeffrey Saut, chief investment strategist at Raymond James wrote in a report.
