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Stocks dropped hard at Wednesday’s open as questions regarding the White House’s handling of an FBI investigation ruffled investor confidence.
The Dow Jones industrial average and the Nasdaq each skidded 0.9% at the start of trade. The S&P 500 dropped 0.8%. Small caps were taking a harsh early beating, sending the Russell 2000 down 1.4% in early trade.
News reports claimed notes taken by former FBI Director James Comey during a February meeting with President Donald Trump, just after National Security Advisor Michael Flynn had resigned, portrayed the president pressing the director to drop the agency’s probe of Flynn. Trump fired Comey on May 9, and the White House has so far given conflicting reasons for why Comey was fired.
The reaction among overseas markets was moderately negative. European markets traded lower, with London’s FTSE 100 down 0.2%, the CAC-40 in Paris off 0.6% and Frankfurt’s DAX falling 0.4% in afternoon trade. Tokyo’s Nikkei 225 dropped 0.5%, shifting it into negative territory for the week. Tokyo receives preliminary first-quarter GDP estimates before its start of trade on Thursday.
Disney Gets Downgrade; Qiwi Scores Breakout
On the Dow Jones industrial average, Walt Disney (DIS) dropped 2.2% at the open, the worst early shot taken among Dow industrials. Macquarie downgraded the stock to neutral from outperform. Fellow Dow components JPMorgan (JPM) and Goldman Sachs (GS) fell 1.7% and 2%, respectively, as financial showed some of the strongest reactions to the overnight news out of Washington D.C.
Also on the Dow, UnitedHealth Group (UNH) was down 0.9%, following a 2% decline Tuesday. The U.S. Justice Department on Tuesday filed its second suit in the past several weeks against the Medicare Advantage provider, this time alleging more than $1 billion in billings fraud.
Restaurants resisted the early undertow, with Red Robin Gourmet Burger (RRGB) up 15% as an analyst upgrade followed a strong first-quarter earnings beat late Tuesday.
Jack In The Box (JACK) sprung ahead 10% after reporting first-quarter earnings above expectations and on-target revenue growth late Tuesday. The company also said it had enlisted Morgan Stanley to explore strategic alternatives for its Mexican food chain Qdoba. The gain snapped the stock free of its converged 10- and 40-week moving averages, and well up the right side of a three-month consolidation.
IBD 50 stock Qiwi (QIWI) rocketed 10% higher ahead of the open, breaking out above a 20.42 buy point in a three-weeks tight pattern. The operator of an ATM and online money transfer network in Russia reported stronger-than-forecast results for the first quarter, and boosted its full-year guidance above consensus views.
Target (TGT) opened 4% higher on smaller-than-expected declines in first-quarter earnings and revenue. A 1.3% decline in same-store-sales was less than half of the decline forecast by analyst consensus.
Colgate Palmolive (CL) jumped more than 3%, after news reports said Chief Executive Ian Cook had said he’d be open to selling the company at $100 per share. The comment, which valued the personal products company near $88 billion, reportedly was made during a conference with institutional investors.
Mortgage Applications Slow; Weekly Oil Inventories Coming Up
Real estate markets received more downside news Wednesday, as the Mortgage Banker’s Association reported its mortgage applications index decreased 4.1% from the prior week, with refinancing down 6% and new purchases down 3%. New purchase applications are 9% higher than year-ago activity. The average interest rate on the 30-year fixed rate contract on loans averaging $424,000 or less remained unchanged at 4.23%, with points edging up to 0.37 from 0.31.
Oil prices rose, but remained below $49 a barrel ahead of the Energy Information Administration’s weekly oil inventories report, due out at 10:30 a.m. ET.
Gold popped 1% higher, trading above $1,249 an ounce. The dollar slumped vs. the euro and the yen, and bonds climbed, trimming the 10-year yield 5 basis points to 2.28%.