It was apparent yesterday that the stock market didn't like what it was hearing out of Washington -- or New York really, as the New York Times article highlighting a potential obstruction of justice move by President Trump sent stock prices reeling.
The brief synopsis of things is that market participants were bothered by the notion that President's Trump's pro-growth agenda items (i.e. tax reform, deregulation, and infrastructure spending) might not come to fruition as quickly as envisioned (i.e. before the end of the year) or perhaps at all.
That was the real concern that took over anyway following a lot of insinuation in press reports that President Trump's dealings could ultimately invite impeachment proceedings.
Time will tell if that ends up being the case, yet market participants were left to grapple with the idea that the fact-finding effort will be a distraction for legislators that will delay progress on tax reform efforts.
The stock market has had an abiding hope that tax reform will eventually lead to stronger economic and earnings growth, so the thought that it may not happen triggered a wide swath of valuation-based selling interest that hit hardest among the financial and information technology sectors.
There hasn't been an urgency this morning either to buy yesterday's dip. That's owed in part to another batch of political headlines, which are being highlighted by reports that Trump campaign officials might have had at least 18 undisclosed contacts with Russian officials leading up to, and following, the election.
The aforementioned report carried the disclaimer that no wrongdoing has been found so far; nevertheless, it has weighed further on investor sentiment. The S&P futures tailed off noticeably in the wake of this report and are currently down eight points, leaving them 0.4% below fair value.
Additionally, the Deputy Attorney General announced the appointment of Robert Mueller, a former FBI Director, as special counsel to handle the investigation into Russia's alleged interference in the 2016 election.
Notwithstanding Mr. Mueller's fine reputation, the fact that he needs to be engaged on such a matter just serves as a reminder of the cloud of political uncertainty that is hanging over the stock market.
Walmart's (WMT) better than expected first quarter report and reassuring second quarter guidance has provided a small silver lining to the dark cloud, as has the better than expected initial claims and Philadelphia Fed Index reports.
A downtrodden earnings report and tepid outlook from Cisco (CSCO), meanwhile, has created some thunder for its shareholders and the Dow Jones Industrial Average. Shares of CSCO are down 7.5% in pre-market action.
In the current environment, good news is having less of an impact than bad news. Accordingly, there has been a somewhat muted response to this morning's encouraging economic data.
Initial claims for the week ending May 13 decreased by 4,000 to 232,000 (Briefing.com consensus 240,000) while continuing claims for the week ending May 6 decreased by 22,000 to 1.898 million, which is the lowest level since November 5, 1988.
The key takeaway from this report is that it covered the period in which the employment survey was conducted for the May employment report, so it will foster an expectation for another month of strong nonfarm payrolls growth.
Separately, the Philadelphia Fed Index soared to 38.8 in May (Briefing.com consensus 18.5) from 22.0 in April, led by a jump in the Shipments Index from 23.4 to 39.1.
The upbeat data took a little steam out of the Treasury market, yet it continues to sport modest gains as part of a defensive bid in the face of the stock market's weakness.