The Dow drops 400 points, a day after its record-setting rally

Getty/Mario Tama

Stocks fell Thursday as concerns about political turmoil in Washington and trade tensions continued to weigh on investors, upending Wednesday’s rally that had led Wall Street to its largest percentage gains in nearly a decade.

The Dow Jones Industrial Average fell 1.8%, or about 400 points, a day after climbing more than 1,000 points to post its best daily point increase on record. The S&P 500 and the Nasdaq Composite each dropped 1.7%. Even after Wednesday’s jump, a series of sharp sell-offs have put stocks on track for their worst month since the Great Depression.

“Buying sentiment towards global equity markets skyrocketed yesterday due to an apparent return of risk appetite and rebounding oil prices,” said Lukman Otunuga, a research analyst at FXTM. “However, with geopolitical risk factors leaving global sentiment extremely fragile, the upside was poised to be limited.”

A rally among high-flying technology companies reversed, with Apple and Amazon each shedding more than 2%. Facebook, Alphabet, and Netflix, meanwhile, fell more than 1%.

Oil also pared gains and descended further into a bear market, down more than a third from October highs. West Texas Intermediate was trading at around $US45.40 a barrel and Brent just under $US54.

Congress was set to reconvene Thursday after a holiday break, the sixth day of a partial government shutdown over border-security funding. Signs of progress remain elusive, however, after President Donald Trump doubled down on demands for his long-promised wall along the southern border.

“The tone and nature of the discourse out of Washington these days (as well as the delivery method itself) has added an extra degree of uncertainty and caution to the markets,” Scott Buchta, a strategist at Brean Capital, said in an email. “As the rhetoric becomes more disruptive and dangerous, investors push back by taking risk off the table and wait for the dust to settle.”

Adding to uncertainty,Reuters reported Trump is considering an executive order that would block US companies from using equipment from China’s Huawei Technologies and ZTE in the new year. That could stir tensions between the largest economies as they race to settle a trade dispute ahead of a March deadline.

The dollar slumped against a basket of major peers after consumer confidence readings came in below expectations. Treasury yields also fell, with the 10-year down 4.5 basis points to 2.752% and the 2-year 3.2 basis points lower at 2.577%.

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