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US stocks dropped after the opening bell in New York after the collapse of Republican plans to repeal Obamacare late last week sparked concerns that the Trump administration may struggle to pass its slate of business-friendly initiatives.
The S&P 500 dropped 0.7 per cent to 2,327 and the Dow Jones Industrial Average fell 0.7 per cent to 20,459.
Monday’s decline for US stocks came on the heels of a broad rotation away from risky assets. The pan-European Euro Stoxx 600 index declined by 0.8 per cent, while Japan’s benchmark Nikkei 225 index shed 1.4 per cent.
Meanwhile, haven assets shined, with the price of US government debt and gold rallying. The benchmark 10-year Treasury note yield fell nearly 5 basis points to 2.35 per cent. It traded at 2.46 per cent a week ago, and at 2.63 per cent on the Monday before that.
Donald Trump’s plans to repeal and replace Obamacare failed in dramatic fashion on Friday as the newly-minted president found it impossible to appease both centrists and more right-leaning members of his own party. While the healthcare reform itself was not expected to be a large boon for business, Wall Street has begun to fret that other measures like tax reform, looser regulation and infrastructure spending may now be watered down.
“The boost to S&P 500 earnings from a lower corporate tax rate is likely to be smaller and to occur later than investors originally expected,” David Kostin, head US equities strategist at Goldman Sachs said.
The Vix index, a measure of expectations for S&P 500 volatility over the next month, has also pushed higher on the back of the gridlock in Congress. It climbed as much as 2.2 points to 15.11 early on Monday, the highest level since November 14.
In currencies, the US dollar fell by 0.8 per cent against a basket of half-a-dozen trading partners, the lowest level on a closing basis since November 10.