U.S. stocks held onto gains Wednesday afternoon as investors weighed U.S.-China trade updates against an impeachment inquiry of President Donald Trump. The three major indices earlier in the session had fluctuated between advances and losses.
The Dow surged mid-morning in New York after Trump told reporters at the UN in New York that a China deal could happen “sooner than you think,” according to Bloomberg. Gains in shares of Nike (NKE) following better-than-expected quarterly results also helped add to advances.
Here’s where the market settled at the end of regular equity trading:
S&P 500 (^GSPC): +0.62%, or 18.28 points
Dow (^DJI): +0.61%, or 163.01 points
Nasdaq (^IXIC): +1.05%, or 83.76 points
U.S. crude oil prices (CL=F): -1.4% to $56.49 per barrel
10-year Treasury yield (^TNX): +9.4 bps to 1.729%
Gold (GC=F): -1.86% to $1,511.50 per ounce
Tuesday after market hours, House Speaker Nancy Pelosi formally announced an impeachment inquiry of President Donald Trump. The inquiry was spurred by a whistleblower report that Trump pressured Ukraine’s President Volodymyr Zelensky to investigate potential 2020 presidential opponent Joe Biden and his son. The whistleblower could testify before Congress as soon as this week, according to a Twitter post from House Intelligence Committee Chairman Adam Schiff Tuesday.
White House released the unredacted memorandum of the call on Wednesday.
The memo showed that Trump asked Zelensky to “look into” Biden and his son. Trump added he would have his lawyer and attorney general connect with Zalensky to “get to the bottom” of the situation.
“There’s a lot of talk about Biden’s son, that Biden stopped the prosecution, and a lot of people want to find out about that so whatever you can do with the attorney general would be great,” Trump said, according to the transcript.
Meanwhile, Trump had confirmed earlier Tuesday that he had withheld military aid from Ukraine, but said that this was because of his view that the U.S. was contributing more to the country than were other European nations. The notes from the call did not show Trump making an explicit link predicating further U.S. aid on an investigation of Biden and his son.
‘Unique context’
The overhang of a formal impeachment inquiry has injected further uncertainty into markets, contributing to the S&P 500’s steepest loss since August on Tuesday.
However, most have pointed out that the impeachment process could take months to unfold, and that the likelihood of it furthering past the Republican-majority Senate remains dubious.
“There is no change to overall investment recommendations, which are only moderately cyclical given previous geopolitical and now political constraints on the business and profit cycles,” JPMorgan analyst John Normand wrote in a note.
But that said, the impeachment inquiry also occurs within a “unique context” in global markets that “now includes four elements – global growth slowdown, classic late-cycle vulnerabilities, high market valuations but somewhat defensive investor positioning,” Normand added.
“It would be complacent to think that the impeachment process just adds another ring to the circus and will prove inconsequential for markets into 2020,” he said. He highlighted “wildcards” that have arisen as a result of the inquiry, including added uncertainty around U.S.-China trade and U.S.-Iran relations, as well as for the 2020 presidential and Senate elections.
History provides little indication as to the direction of the stock market amid a presidential impeachment inquiry. The two previous incidences – during the Nixon and Clinton administrations – yielded two different results.
“During the Nixon saga, stocks were already tumbling (of course, we were going into recession) and kept falling after the formal inquiry process started,” Neil Dutta, Renaissance Macro Research head of economics, wrote in an email. “During the Clinton impeachment process, markets exploded to the upside as the economy boomed. Perhaps these political events are eventually overwhelmed by the fundamentals?”
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Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck
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