US stocks slumped in pre-market trading amid new reports that President Donald Trump is being investigated for obstruction of justice, while investors also digested unexpectedly hawkish guidance from the Federal Reserve.
The tech-heavy Nasdaq Composite index was hit hardest, slipping 1.1% at 8:24 a.m. ET. The S&P 500 lost 0.7%, while the Dow fell 0.4%.
Equity weakness started in earnest on Wednesday after the Fed announced a 25 basis point rate increase as expected, but took a surprisingly hawkish stance on the pace of remaining hikes. The central bank also said it will shrink its $US4.5 billion balance sheet this year, despite recent data showing that inflation is lagging its 2% target.
The Fed now faces a delicate balancing act as it attempts to reconcile flagging inflation with other positive economic data, like the US unemployment rate, which sits at its lowest in 16 years.
Meanwhile, US stocks that were starting to look immune to the myriad negative headlines surrounding Trump finally reacted to the latest news about the ongoing FBI investigation.
Obstruction of justice is a criminal and impeachable offence, and investors are clearly concerned that Trump will be unable to implement the proposed policies that have carried stocks higher since the election.
The stock sell-off is also being exacerbated by a broad decline in commodities, most notably continued losses in crude oil, which has slipped 4.6% over the past two days.
Further, Asian and European stocks were down in regular trading, also applying pressure to the US market.