(Bloomberg) -- From the best day in three weeks to one of the worst.
Such was the roller coaster investors rode Wednesday, when the S&P 500 Index advanced as much as 0.8 percent before wiping out the gain in the last two hours to end 0.3 percent lower. In the end, it was the biggest reversal of its kind since February 2016.
The whiplash began in Washington. Stocks started paring gains after minutes from the Federal Reserve's last meeting showed many officials thought a rise in equity prices contributed to an easing in financial conditions, with some viewing stock levels “quite high relative to standard valuation measures.” The retreat accelerated after House Speaker Paul Ryan said that tax reform could take longer than a health-care overhaul.
In a market that just ended the best quarter since 2015 with a record number of investors saying stocks are overvalued, jarring moves are no surprise. Still, the speed and magnitude highlights the vulnerability of stocks after optimism over President Donald Trump's growth agenda fueled a rally that sent the S&P 500 Index up more than 11 percent since his election.
“The market was hoping Washington will finally do the right thing, to pass something to stimulate the economy, and we're finding even with the majority Republican and Republican president, we're still locked up,” Frank Ingarra, head trader at Greenwich, Connecticut-based NorthCoast Asset Management LLC, which oversees about $1.7 billion, said by phone.
“When you have valuations so stretched, people start second guessing a bit.”
Stocks opened trading higher on Wednesday, after a private report showed American companies added workers to payrolls in March at the fastest pace since December 2014. Equities lost altitude as the Fed minutes showed most officials backed a policy change that would begin shrinking the central bank's $4.5 trillion balance sheet later this year, while reiterating their outlook for gradual interest-rate increases.
Stocks took a further hit after Ryan said the House chose to tackle a health-care overhaul first because they were actually closer to an agreement with the Senate on that than on tax reform. Anxiety over Trump's ability to enact his pro-growth promises has grown since the failure of the health bill last month.
To contact the reporter on this story: Lu Wang in New York at lwang8@bloomberg.net.
To contact the editors responsible for this story: Arie Shapira at ashapira3@bloomberg.net, Chris Nagi, Richard Richtmyer
Essential Business Intelligence, Sharp Market Insights, Practical Personal Finance Advice, Daily Fuel, Gold and Silver Prices and Latest Stories — On NDTV Profit.
