Stocks are lower in early trading this morning (Dow -168 pts; SPX -.9%). This is the worst trading day for the Dow since October 2016. Financials (-2%) and industrials (-1.2%) are taking the brunt of the punishment. Biotechs, semiconductors and regional banks are down 2% or more in early trading. Utilities and real estate are the only sectors in the green. The VIX Index is trading up to 12. VIX April futures are up around 13. The dollar and commodities are both trading lower. WTI crude oil is down 1% to $47.60/barrel. The dollar, by the way, is at its lowest point so far this year. Not surprisingly, gold is up a bit today. Bonds are trading higher in price, lower in yield. The 5-year Treasury yield, after breaking out to new multi-year highs a week ago, is back down around 1.97%. The 10-year yield is trading down to 2.44%.
The Trump policy agenda is in question this morning. In other words, traders are wondering how much of it can realistically be enacted this year. The first major item is the repeal and replacement of ObamaCare. And later this week there will be a House of Representatives vote on it. So traders are watching that closely, and it is clearly affecting the dollar, rates, and stock prices. Bloomberg ran an article this morning saying that a failure to replace ObamaCare now would “imperil the goal of a massive tax cut—and perhaps more of President Donald Trump’s legislative agenda.”
At the same time, traders are not paying so much attention to the fact that most economic data continue to improve. Citigroup’s US Economic Surprise Index just broke out to a new multi-year high. The Index of Leading Indicators is finally beginning to turn higher. And we’ve noticed a steadily improving trend in manufacturing business activity.