U.S. equities largely finished lower on Friday to cap what was the worst week in months as Congressional resistance to the healthcare reform bill supported by President Trump and House Speaker Paul Ryan couldn’t muster the needed support.
As a result, Ryan pulled the bill before a vote could be held delivering an embarrassing political defeat to Trump who has said he will now focus on tax reform and allow Obamacare to “explode” to build political support for a second try at reforming healthcare.
Wall Street responded negatively to the news since the lack of political unification by Republicans — who control the Senate, the House and the White House — suggests efforts on tax cuts and infrastructure spending could be similarly painful. And thus, the valuation-only surge in stock prices since the election, on optimism over Trump’s legislative agenda, suddenly looks vulnerable.
In the end, the Dow Jones Industrial Average lost 0.3% after trading with a loss of more than 100 points earlier in the session, the S&P 500 lost 0.1%, the Nasdaq Composite gained 0.2% and the Russell 2000 gained 0.1%. Treasury bonds were stronger, the dollar was little changed, gold gained 0.1% and crude oil added 0.6%.
Defensive utility stocks led the way with a 0.4% gain while materials were the laggards, down 0.9%. Technically, the Dow is closing in on its 50-day moving average for the first time since early February as breadth continues to narrow and sentiment measures remain red hot.
Footwear maker Skechers USA Inc (NYSE:SKX) gained 5.2% thanks to an upgrade from analysts at Cowen on expectations of increased margins on international sales. SeaWorld Entertainment Inc (NYSE:SEAS) gained 4.7% after the Zhonghong Group acquired a 21% and will tap SEAS to advise on the development and design of theme parks in China, Taiwan, Hong Kong, and Macau. And Under Armour Inc (NYSE:UAA) gained on an upgrade from Jefferies on survey data showing its brand appeal had strengthened and demand of athletic apparel remains robust.
On the downside, Finish Line Inc (NASDAQ:FINL) fell 19.5% on a Q4 earnings and gross margin miss on weaker-than-expected comp-store sales. GameStop Corp. (NYSE:GME) fell 13.6% on disappointing guidance.
Besides the political machinations, the other noteworthy news was more hawkish commentary out of the Federal Reserve in the wake of last week’s rate hike decision. New York Fed President Dudley said the economy is in a pretty good place and that the Fed has nearly achieved its twin objectives of full employment and price stability (and thus, can increase the pace of policy normalization).
Looking ahead, the calendar is relatively light as the first quarter comes to a close. Friday will feature an update on personal income and consumption as well as another indicator on inflation and consumer sentiment.
Anthony Mirhaydari is founder of the Edge (ETFs) and Edge Pro (Options) investment advisory newsletters. A two-week and four-week free trial offer has been extended to Investorplace readers. Redeem by clicking the links above.