US stocks tumble as Flynn agrees Russia probe cooperation

Dow drops more than 100 points, erodes weekly gains, as former national security adviser pleaded guilty to lying to the FBI

By 

Sara Sjolin And Anora Gaudiano

December 1, 2017 Updated: 6:04 p.m. GMT

US stock-market indexes turned decisively lower in Friday trade after former national security adviser Michael Flynn pleaded guilty to lying to the Federal Bureau of Investigation and has promised full cooperation with the special counsel’s Russia investigation, MarketWatch reports.

Friday’s losses eroded what would have been solid weekly gains for the S&P 500 and Dow industrials, but the benchmarks are still on track to end the week higher.

The tech-heavy Nasdaq Composite is set to end the week lower, however after a big selloff among the largest, highflying stocks.

Where are stocks trading? The blue-chip benchmark Dow industrials which was down about 300 points immediately after the Flynn news, recovered some ground, trading 121 points, or 0.5%, lower to 24,149. The index was still on track for a 2.5% gain over the week.

The S&P 500 fell 17 points, or 0.7%, to 2,630. The benchmark index is on track to end the week 1% higher.

The Nasdaq Composite Index declined 73 points, or 1%, to 6,800 and looked set for a 1.2% weekly loss.

The Nasdaq index on Wednesday suffered its biggest drop in more than three months, as highflying tech stocks slumped amid portfolio rebalancing among traders.

What’s driving the market? Investors reacted to the news that the former national-security adviser Michael Flynn pleaded guilty Friday to lying to the FBI, becoming the second member of President Trump’s campaign to reach a deal with the special counsel investigating Russia’s alleged interference in the US election.

ABC News reported that Flynn had promised “full cooperation” in the special counsel’s investigation and is prepared to testify that Trump directed him to make contact with the Russians, initially as a way to work together to fight ISIS in Syria.

Some analysts suggested that this news would delay the vote in the Senate to pass the tax cut bill aimed at lowering corporate tax rates. The final vote on the bill was expected late Thursday but was pushed to Friday because a number of issues still remained unresolved.

Among key concerns is how to finance the tax cuts. On Thursday, the Joint Committee on Taxation said the Senate bill would generate more than $400bn in revenue over 10 years through economic growth, but that’s not nearly enough to compensate for the measure’s $1.4tn cost.

What are strategists saying?
“Mike Flynn testifying against the president was one thing that the market was not pricing in whatsoever, so it’s not surprising to see such a sharp knee-jerk reaction,” Mike Antonelli, equity sales trader at Robert W. Baird & Co.

“What this also shows is how everyone in the market was positioned long—nobody was short. And news like this can be seen as derailing the tax cuts bill, which is what most investors want,” Antonelli said.

What’s on the economic docket? The Markit manufacturing purchasing managers index for November fell to 53.9 from 54.6 in October. The ISM manufacturing reading dipped to 58.2% in November from 58.7% in October.

What stocks are moving? Mylan shares jumped 3% after a CNBC report on Thursday that Amazon was holding preliminary talks with generic drugmakers — including Mylan and Novartis unit Sandoz—as it contemplates entering the pharmacy business.

Energy shares also attracted investors. Halliburton shares rose 3%, while Schlumberger rose 2.2%.

Some heavily-weighted tech stocks continued to weaken. Shares of Apple fell 1%, while NVIDIA  slid 2/3% and Amazon dropped 1.2%.

Shares of General Motors fell 1.5% after the car maker reported monthly sales in the US fell by 2.9%, with declines in all brands. Ford Motors shares fell 0.8%.

Shares of Blue Apron Holdings climbed 6.4% after the struggling meal-kit maker late Thursday installed Chief Financial Officer Brad Dickerson as chief executive, pushing out co-founder Matthew Salzberg.

What are other markets doing? Asian markets closed mixed, while European stocks were firmly lower in the early going.

Oil prices advanced, building on gains seen after major oil producers, as expected, on Thursday hammered out an agreement to extend ongoing production curbs through 2018. Crude for January traded 2% higher at $58.64 a barrel.

Gold prices rose sharply, trading 1% higher at $1,288.50 an ounce. The ICE Dollar index dropped after Flynn news, trading 0.4% lower at 92.696. The yield on the 10-year Treasury bond fell 7 basis points to 2.34%.