Dow posts 8-day slide, longest since 2011, as Street weighs tax reform prospects

"When you look at some of the areas that have helped the market, they are waning a bit here," said Daniel Deming, managing director at KKM Financial. "I think you're also seeing some valuation concerns as well.

The Nasdaq composite closed 0.2 percent higher after briefly falling 1 percent.

The Dow Jones industrial average ended about 45 points lower — after falling nearly 200 points earlier, with Goldman Sachs contributing the most losses. The 30-stock index also posted an eight-session losing streak, its longest since 2011.

The S&P 500 dipped 0.1, with financials and telecommunications leading decliners. Financials were dragged by bank stocks, as the SPDR S&P Bank ETF (KBE) and the Regional Banking ETF (KRE) both fell around 0.5 percent.

"This is coming as investors reassess how bad the news on health care actually is," said Kate Warne, investment strategist at Edward Jones. "There are definitely mixed views on that. This could be a catalyst for Republicans to do a better job with tax reform."

The Trump administration was dealt a body-blow Friday after a House bill aimed at replacing Obamacare was pulled from the floor. The GOP bill faced opposition not just from Democrats, but also from conservative and more moderate Republicans, and was not able to secure enough votes to pass.

"It's been such a powerful rally that it's not surprising to see a pullback after a disappointment that big," said Maris Ogg, president at Tower Bridge Advisors, referring to the health care bill's defeat. "But the big picture really hasn't changed."

The House vote was seen as crucial for the Trump agenda. Trump had said the repeal and replacement of Obamacare must happen before action can be taken on his other plans, including a major tax reduction. Stocks have rallied significantly since the U.S. election on hopes of lower taxes, deregulation and fiscal stimulus.

"Certainly what happened on Friday makes it harder [to push tax reform], but we're not bogged down by it," said Jeremy Klein, chief market strategist at FBN Securities. "I think people are realizing we have a long way to go on tax reform."

Trump said Friday the administration would move to try and slash taxes.

The major indexes have taken a breather this month from their rip-roaring, postelection rally. The S&P and Dow were both down around 1 percent this month, while the Nasdaq held flat.

"I don't think this is the beginning of a full-blown correction, but it's definitely a reversal in market sentiment," said Peter Cardillo, chief market economist at First Standard Financial.

U.S. Treasurys, which had fallen sharply immediately after the election, have also recovered ground this month after the Federal Reserve maintained its interest-rate outlook largely unchanged at its March meeting.

"One by one, we're seeing the Trump trade unwind across all markets," said Adam Sarhan, CEO of 50 Park Investments, noting that assets like gold and the Mexican peso are around levels not seen since before the election. "A defensive stance is warranted until we see some bullish action take place, and a lot of that depends on what happens in D.C."

The benchmark 10-year note yield fell to 2.37 percent, while the short-term two-year note yield dipped to 1.25 percent.

The U.S. dollar declined to a four-month low against a basket of major currencies, with the euro near $1.087 and the yen around 110.6.

Overseas markets also faced pressure following the American Health Care Act's defeat, with the pan-European Stoxx 600 index falling 0.4 percent.

There are no major economic data due Monday, but this week investors will digest the third reading on fourth-quarter GDP and personal income data, among others.

The Dow Jones industrial average fell 45.74 points, or 0.22 percent, to close at 20,550.98, with Chevron lagging and DuPont leading advancers.

The S&P 500 dropped 2.39 points, or 0.1 percent, to end at 2,341.59, with telecommunications leading seven sectors lower and health care the biggest riser.

The Nasdaq composite gained 11.64 points, or 0.2 percent, to close at 5,840.37.

Advancers and decliners wera about even at the New York Stock Exchange, with an exchange volume of 825.90 million and a composite volume of 3.227 billion at the close.

The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, traded near 12.6.

Gold futures for April delivery rose $7.20 to settle at $1,255.70 per ounce.

On tap this week:

6:30 p.m. Dallas Fed President Robert Kaplan


8:30 a.m. Adv. econ indicators
9:00 a.m. S&P Case-Shiller HPI
9:45 a.m. Services
10:00 a.m. Consumer confidence
12:45 p.m. Kansas City Fed President Esther George on the economy and policy
12:50 p.m. Fed Chair Janet Yellen speaks on workforce development challenges in low-income communities
1:00 p.m. Dallas Fed President Robert Kaplan
4:30 p.m. Federal Reserve Governor Jay Powell


9:20 a.m. Chicago Fed's Evans
10:00 a.m. Pending home sales
11:30 a.m. Boston Fed President Eric Rosengren
1:15 p.m. San Francisco Fed President John Williams


8:30 a.m. Jobless
8:30 a.m. Q4 Real GDP
9:45 a.m. Cleveland Fed President Loretta Mester
11:00 a.m. Dallas Fed's Kaplan
11:15 a.m. San Francisco Fed's Williams
4:30 p.m. New York Fed President William Dudley


8:30 a.m. Personal income
8:30 a.m. Consumer spending
8:30 a.m. Core PCE prices
9:45 a.m. Chicago PMI
10:00 a.m. Consumer sentiment
10:00 a.m. Minneapolis Fed President Neel Kashkari
10:30 a.m. St. Louis Fed President James Bullard

Dow Jones Industrial Average (DJIA) futures are far below fair value, indicating the large-cap index is on pace for a triple-digit plummet at the open. Weighing on stocks this morning is Friday afternoon's decision to pull the healthcare bill before a House of Representatives vote, when it became clear not enough votes could be found to pass the American Health Care Act, even after President Trump issued an ultimatum. The failure has cast a shadow of doubt over the Trump administration's ability to follow through on other campaign promises, including tax reform, looser financial regulations, and infrastructure. Against this backdrop, the Dow is on pace for an eighth straight loss.

Elsewhere, oil prices are slipping on concerns over whether the output cuts from the Organization of the Petroleum Exporting Countries (OPEC) and other producers will be extended past June. May-dated crude futures were last seen 1% lower at $47.47 per barrel, following dubious comments from Russian Energy Minister Alexander Novak.

Continue reading for more on today's market, including:
  • 4 Dow stocks flashing "buy" signals.
  • How options traders can play the fear index.
  • The diagnostics stock that more than quadrupled last week.
  • Plus, Cal-Maine slides on earnings; G-III eyes multi-year lows; and the drugmaker popping on China approval.
Futures on the Dow Jones Industrial Average (DJIA) are nearly 119 points below fair value.

5 Things You Need to Know Today
  1. The Chicago Board Options Exchange (CBOE) saw 760,823 call contracts traded on Friday, compared to 525,693 put contracts. The resultant single-session equity put/call ratio edged up to 0.69, while the 21-day moving average stayed put at 0.65.
  2. A disappointing earnings result has shares of Cal-Maine Foods Inc (NASDAQ:CALM) off 6.3% ahead of the bell, with the stock on track to open at a two-year low. The company noted that "egg markets have remained under pressure," citing both lower prices and lower demand.
  3. Retail interest G-III Apparel stock reported a wider-than-expected fourth-quarter loss, overshadowing an agreement with Macy's, with the latter becoming the only department store selling G-III's DKNY brand women's clothing and accessories in the U.S. Shares of GIII are set to open in three-year low territory, shedding 12.8% in electronic trading.
  4. After winning approval in China for its lung cancer drug, Tagrisso, AstraZeneca plc (ADR) (NYSE:AZN) stock is set to add 1% at the open. The shares could be on track for their best close in more than five months, which likely sits just fine with options traders, who continue to place bullish bets on the drug stock.
  5. The Dallas Fed manufacturing index will be released today, and Chicago Fed President Charles Evans will take the mic during the trading session, while Dallas Fed President Dennis Kaplan is slated to speak after the close. Conn's (CONN), Digital Ally (DGLY), and Red Hat (RHT) are due to report earnings.
Overseas Trading

Stocks in Asia were rocked by House Republicans' decision to shelve the healthcare vote on Friday, casting doubt on the Trump administration's ability to pass pro-business policy changes. Japan's Nikkei spiraled 1.4% lower, with losses exacerbated by a stronger yen. Also, Hong Kong's Hang Seng and South Korea's Kospi were down 0.7% and 0.6%, respectively. Chinese stocks were the least affected -- though the Shanghai Composite still slipped 0.1%, as regulators introduced rules preventing individuals from buying commercial property in Beijing. Plus, the People's Bank of China declined to inject capital into the banking system, citing "relatively high levels of liquidity."

Trump's healthcare hiccup is taking a toll on European markets, as well. Financial stocks are struggling, in particular, as investors run toward precious metals -- a perceived "safe haven" amid economic uncertainty. The pound is strengthening, too, pressuring London's FTSE 100 nearly 0.7% lower. Meanwhile, despite Germany's Ifo business climate index registering at a nearly six-year high, the DAX is down 1%. Rounding things out, the French CAC 40 has surrendered 0.3%.

The Trump stock market rally is under siege

Wall Street no longer believes President Trump's agenda is a slam dunk.

The Dow fell on Monday for the eighth day in a row, its longest losing streak since 2011.

Trump's stunning failure to repeal and replace Obamacare spooked investors, sending the Dow sinking as many as 184 points in the first few minutes of trading. But the index rebounded from those early losses, closing down by 46 points. The Nasdaq eked out a gain of 0.1%.

The recent market retreat is a reflection of rising fears on Wall Street that Trump's bold promises of sweeping tax reform, regulatory relief and infrastructure spending is in doubt. Investors have begun to contemplate that the Trump agenda will be delayed, watered down or even derailed.

"Global financial markets are in a risk off mode after the political spectacle that unfolded last week on Capitol Hill," analysts at Rabobank wrote in a report on Monday.

CNNMoney's Fear & Greed Index briefly tipped into "extreme fear." That's a dramatic reversal from "extreme greed" shortly after Trump took office. The Dow is on track for its first monthly decline since October and worst month since January 2016.

Big banks, previously one of the hottest pockets of the market, suffered the worst losses on Monday. Morgan Stanley (MS) fell over 2%, while Goldman Sachs (GS) and Bank of America (BAC)shed over 1% apiece.

The concern is that if Trump wasn't able to replace Obamacare, a law that Republicans almost universally detest, then how will he tackle even more complex undertakings? Trump has pledged to quickly pivot to tax reform, but that could be even more challenging, especially given the serious GOP fractures exposed by the the health care defeat.

"If the repeal and replace was any indication, tax code reform is going to have a really hard time finding any traction. It's not something that can take place overnight," said Peter Kenny, an independent market analyst and founder of Kenny's Commentary.

That's a problem because Wall Street had been banking on the "massive" tax cuts that Trump promised by August. The Dow zoomed as much as 2,800 points since the election on these hopes. But because the fundamentals (earnings, economic growth) haven't really improved, stocks have become expensive.

"Has the stock market priced in the perfect scenario that is becoming clear that we just won't get?" asked Peter Boockvar, chief market analyst at The Lindsey Group.

"A watered down Trump agenda with no changes of substance to health care and a more modest tax reform bill is NOT what I believe is currently priced in to stocks," Boockvar wrote in a report to clients.

Of course, the stock market has had enormous gains since Trump's victory, and a pullback is long overdue. A cool-off period is a healthy development for the Trump rally, most experts would agree.

It's also worth noting that while the Dow is on track for an eighth day of declines, it hasn't descended all that much. The Dow is down less than 2% during the slump and remains less than 600 points away from the all-time high set on March 1 following Trump's well-received speech to Congress.

By comparison, the last time the Dow fell eight days in a row back in August 2011 the index had shed an alarming 7% of its value.

Michael Block, chief market strategist at Rhino Trading, joked that the recent selloff is due to the "shocking reality that President Trump can't snap his fingers and get business and stock friendly policies enacted."
Block said "we are seeing the knee jerk reaction to that ideal being quashed."

So what happens next?

Wall Street will be looking for signs that the Trump agenda is not stalled.

While the health care failure is "undoubtedly a negative signal" for the rest of Trump's agenda, it is "far from a death knell," according to Isaac Boltansky, a policy analyst at Compass Point.

Still, he said the Obamacare saga signals a final tax reform deal that is "less sweeping -- both in scale and scope -- than the market is currently reflecting."

Wall Street hasn't been helped lately by renewed trouble in the oil patch. Crude retreated another 1.5% to just over $47 a barrel on Monday amid continued concerns about resurgent U.S. shale production.

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