U.S. stocks closed lower Tuesday, after President Trump criticized China in a United Nations speech, undermining investor sentiment that had been improving on hopes for successful trade talks in October.
Equities extended their losses after U.S. House Speaker Nancy Pelosi, when asked about launching impeachment proceedings against the president, said she would make an announcement later Tuesday after meeting with Democratic Party leadership and House committee chairman.
How did the major benchmarks fare?
The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +0.40% fell 141.81 points, or 0.5%, to 26,806.18 while the benchmark S&P 500 index /zigman2/quotes/210599714/realtime SPX +0.47% declined 25.16 points, or 0.8%, at 2,966.62. The Nasdaq Composite index /zigman2/quotes/210598365/realtime COMP +0.87% retreated 118.84 points, or 1.5%, to 7,993.63.
At session highs Tuesday morning, the Dow was up 129.69, or 0.4%, the S&P had risen 16.27 points, or 0.5% and the Nasdaq was up as many as 46.37 points, or 0.6%
At session lows the Dow fell 245.03 points, or 0.9%, the S&P 34.04 points or 1.1% and the Nasdaq had lost 117.26 or 1.8%.
What drove the market?
Equities turned sharply lower after it appeared the chances that the House of Representatives pursuing an impeachment inquiry against President Trump were on the rise. When asked about impeachment, Pelosi told NBC news , “Later today I will make an announcement after I meet with my chairmen, my leadership and my caucus.” Subsequent reports indicated that the Speaker will announce her support for a formal inquiry Tuesday after the market close.
Mid-afternoon President Trump said he had authorized a declassified transcript of a phone call with the Ukrainian president, after which stocks clawed back some of their losses.
Calls for taking action against the president have risen during the past week, after reports alleged the president used the threat of withholding economic aid to Ukraine to pressure officials in Kiev to produce information damaging to Democratic presidential candidate Joe Biden, whose son Hunter Biden has had business dealings in Ukraine.
“I think [the impeachment news] is driving this,” said Willie Delwiche, equity strategist at R.W. Baird told MarketWatch. “It doesn’t need to be a commentary on impeachment specifically, but it just creates more uncertainty,” for a market that is already facing an uncertain future on trade relations with China and a 2020 election that is quickly approaching, he added.
To be sure, If the House of Representatives votes to impeach the president, that would not necessarily result in his removal from office, which would require a vote of two-thirds of the U.S. Senate, now controlled by Republicans. When Bill Clinton was impeached by the House in 1998, but acquitted in the Senate, the event had little effect on markets.
Markets were already trending lower after Trump accused China of manipulating its currency and stealing intellectual property in a U.N. speech to world leaders only weeks before U.S. - China trade talks. Earlier global equity markets were buoyed by modest optimism around the trade talks U.S. Treasury Secretary Steven Mnuchin late Monday told Fox Business Network that the deputy-level negotiations between the two countries had made some progress.
Early morning gains indicated that “the market wants to move forward, but investors need to see something to get enthused about,” said Karyn Cavanaugh, senior market strategist at Voya Investment Management, in an interview. “Trump’s speech at the U.N. wasn’t conciliatory at all. There was hope we’d get positive trade news this week but as the day continued you’ve had disappointments that have crept in.”
Weak U.S. and global economic data is also weighing on investor sentiment.