Welcome!
2017-03-21 22:27:02
S.&P. 500 Ends Intraday Trading Streak With a Dip

It had been one of Wall Street’s more confounding streaks.

Until Tuesday morning, the stock market’s benchmark, the Standard & Poor’s 500-stock index, had gone 64 consecutive trading days without declining more than 1 percent at any point in a trading session.

Making the streak even more remarkable, such extraordinary composure from investors had occurred in a period of political volatility as fresh controversies dogged the Trump White House and Europe braced for elections in France and elsewhere on the Continent.

This long period of market tranquillity highlights the confidence many investors and businesses have shown in President Trump’s promise to ignite economic growth.

This optimism was tested Tuesday as the major market indicators ended down more than 1 percent, led by a sell-off in financial stocks.

“There is a saying that the market makes fools of us all,” said Charlie Bilello, director of research at Pension Partners, an investment advisory firm. “And that is true here because we have been in one of the most peaceful, calm periods in the history of the stock market.”

The question now is whether, after months of mostly ignoring political headlines, investors will weigh the possibility that problems with repealing the Affordable Care Act and the uproar over the Trump campaign’s possible ties with Russia could weaken the president’s ability to pass market-friendly laws.

On Tuesday, the S.&P. 500 closed down 1.24 percent, its sharpest daily decline since October. At 161 days, it was the longest period between closing declines of 1 percent or more in the index since June 1985.

In terms of intraday trading, the period without big drops in the index was the longest since 1962, beating by a wide margin the previous record of 34 days in mid-1995.

For the day, the narrower Dow Jones industrial average ended down 1.14 percent, and the Nasdaq composite index finished off 1.83 percent.

Large financial stocks like Goldman Sachs, Bank of America and JPMorgan Chase led the way down on Tuesday as investors began to show concern that President Trump’s daily political battles might harm his ability to push through an ambitious economic agenda. The S.&P. financials index had its biggest fall since late June, in the wake of Britain’s vote to leave the European Union.

The value of the dollar slipped against the euro and other major currencies.

The yield on the 10-year Treasury note declined to 2.41 percent, generally an indication that investors were selling riskier assets and piling into safer securities like government bonds.

Since November, the stock market rally has been fueled by expectations that President Trump, helped by Republican majorities in the House and the Senate, would be able to push through tax cuts, roll back regulations and kick-start a round of government-backed infrastructure spending.

No signs indicate those expectations have fundamentally changed. A one-day, 1.24 percent decline three months into one of the better starts to an investment year in recent memory is no indication that a correction could be imminent, market specialists said.

And many observers remain convinced that the combination of fiscal stimulus, a strong economy and low but gradually rising interest rates will remain a powerful lure for investors.

“This will be the first time since the mid-1960s that the federal government may provide a positive impulse to an economy that is at full employment,” said Bob Miller, a senior bond investor at BlackRock.

Because interest rates are so low, a round of rate increases from the Federal Reserve is not likely to harm growth assets like stocks, Mr. Miller said.

It has been precisely this type of optimistic outlook that has kept the Chicago Board Options Exchange Volatility Index, or VIX — also known as Wall Street’s fear gauge — at such historically low levels.

Low volatility readings are generally seen at the end of an economic expansion as confidence, wages and markets rise in unison.

Such is the case now, Mr. Bilello said, which ought to be a warning to investors that good times do not last forever.

Mr. Bilello is not predicting a major correction. He just notes that the prices for stocks relative to their earnings have been higher only in 1929 and 1999 — two well-known market tops.

“This would be the ninth straight year that the S.&P. finishes the year higher than the year before,” Mr. Bilello said. “And if you combine that with very high valuations, it means that investors should expect more volatility going forward.”