U.S. stocks closed sharply lower Wednesday with all three major indices recording their worst day so far this year due to the latest turmoil in Washington that triggered market concerns on whether the Trump administration could continue to push its economic reform agenda.

“The market is responding to the probability that tax reform, infrastructure spending, healthcare reform and trade deals might not occur,” Brendan Ahern, chief investment officer of Krane Funds Advisors, told Xinhua.

 

The Dow Jones industrial average ended 372.82 points lower Wednesday, a steep fall driven mainly by share declines in Dow components Goldman Sachs and J.P. Morgan Chase.

Shares of Goldman Sachs dropped 5.27 percent to 213.72 U.S. dollars while J.P. Morgan Chase closed down 3.81 percent to 84.27 dollars.

The broader S&P 500 dropped 43.64 points, or 1.82 percent, with financials tumbling more than three percent.

The financial sector had been the best performer in what Wall Street called “Trump Rally,” since President Donald Trump assumed office and promised large-scale deregulation and tax reform.

The tech heavy Nasdaq declined 2.57 percent, or 158.63 points to 6,011.24. The index notched record close in two consecutive sessions on Monday and Tuesday.

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“The U.S. equity market rally has been driven by the pro-growth agenda proposed by the president and supported by the Republican majority in Congress,” said Ahern, adding that the situation has changed.

Analysts said the latest White House controversies have weighed on market sentiment and the market performance on Wednesday was a typical flight to safety as political turmoil triggered investor concerns.

“Recent political distractions have the potential to derail the implementation of such policies that have helped support the rising U.S. stock market,” Ahern said.

The White House on Tuesday pushed back against a new wave of media allegations that Trump might have tried to obstruct justice by asking ex-FBI Director James Comey to end a probe into former national security adviser Michael Flynn.

“I hope you can let this go,” Trump told Comey at the time, according to a New York Times report, quoting two people who read the memo Comey wrote shortly after meeting with Trump in the Oval Office one day after Flynn resigned over a Russia-related scandal in February.

Investors have been shocked by the news and worried Trump’s ability to deliver on business-friendly policies.

The CBOE Volatility Index, widely considered the best gauge of fear in the market, jumped 46.38 percent to 15.59. Just a week earlier, the index hit 9.77, lowest in more than two decades.

Analysts noted that it was the first time that markets have hinted at risk-off behavior in response to increased political risk in Washington. Talking about market outlook, some warned investors of possible downward trend.

“Some of the technicals have turned negative, such as an apparently imminent bearish crossover on a six-month snapshot of the Moving Average Convergence Divergence. Relative strength also indicates a market closer to an ‘overbought’ condition than it is to neutral,” Stephen Guilfoyle, president of Sarge986 LLC, wrote in a note.

“Despite strong corporate earnings, U.S. equity market valuations are high compared to emerging market and European equities. Investors are apt to use U.S. weakness as opportunity to rebalance to less expensive markets,” said Ahern.

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Market demand for safe-haven currencies soared on Wednesday, with Japanese yen rising over 1.8 percent against the dollar during the session.

The U.S dollar decreased against most major currencies. The dollar index, which measures the greenback against six major peers, was down 0.61 percent at 97.506 in late trading.

Gold futures on the COMEX division of the New York Mercantile Exchange rose sharply on Wednesday. The most active gold contract for June delivery jumped 22.3 dollars, or 1.80 percent, to settle at 1,258.7 dollars per ounce.

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