US stocks tumble after President Donald Trump's former adviser Michael Flynn pleads guilty
NEW YORK - (AP) -- U.S. stock indexes recovered somewhat from a steep morning slide Friday after Senate Republicans signaled they have enough votes to push forward on a tax overhaul bill.
The stock market stumbled after former national security adviser Michael Flynn pleaded guilty to lying to the FBI and said he would cooperate with the probe into Russian meddling in the U.S. presidential election. Technology and industrial stocks accounted for much of the decline. Small-company stocks, which would benefit most from corporate tax cuts, fell more than the rest of the market.
THE QUOTE: "The losses that we saw right when the Flynn information came out — the market just hit an air pocket," said Phil Orlando, chief equity strategist at Federated Investors. "The market is trying to sort this out and maybe it doesn't think it's quite as bad as the initial shock when the headlines crossed."
KEEPING SCORE: The Standard & Poor's 500 index fell 11 points, or 0.5 percent, to 2,635 as of 1:47 p.m. Eastern Time, erasing its gain from a day earlier. The Dow Jones industrial average slid 85 points, or 0.3 percent, to 24,190. The average had been down more than 350 points earlier. The Nasdaq composite lost 45 points, or 0.7 percent, to 6,828. The Russell 2000 index of smaller-company stocks gave up 14 points, or 1 percent, to 1,529. The indexes had been little changed before Flynn's plea deal was announced.
RUSSIA PROBE: A federal judge said that Flynn is cooperating with the wide-ranging investigation led by special counsel Robert Mueller. In pleading guilty Friday to lying to the FBI about his contacts with the Russian ambassador, Flynn admitted he followed directions from an unnamed member of the Trump transition team. Mueller is examining possible coordination between Russia and the Trump campaign to influence the outcome of the 2016 election. Flynn is the first official who worked in the Trump White House to make a guilty plea in the investigation.
TAX CUTS: Investors were keeping an eye on Washington as Republicans moved to make major changes to their proposed tax overhaul package ahead of a vote Friday. Among the changes aimed at appeasing deficit hawks is a rollback of some of the tax cuts after six years. Senate Majority Leader Mitch McConnell said after a closed-door meeting of Republican senators that the GOP has the votes to deliver the legislation, which is expected to add $1 trillion to the nation's deficit over 10 years. It would also slash the corporate tax rate, offer more modest cuts for families and individuals and eliminate several popular deductions.
"The tax bill, in our mind, is going through," said Orlando. "This Flynn situation, the Mueller investigation, does not derail the tax reform, which we think is essentially at hand."
TECH SLIDE: The technology sector, an investor favorite since the beginning of the year, had some of the biggest losses. Qorvo fell $2.71, or 3.5 percent, to $73.87.
NOT QUITE YET: Qualcomm declined 1.5 percent after Bloomberg News reported that Broadcom, a rival chipmaker, won't make a new offer for the company until next year. Qualcomm fell $1.02 to $65.32. Broadcom lost $9.87, or 3.6 percent, to $268.07.
UGLY OUTLOOK: Ulta Beauty slid 9.1 percent after the beauty products retailer issued a disappointing forecast for the current quarter that overshadowed solid third-quarter results. The stock was the biggest decliner in the S&P 500, dropping $20.16 to $201.55.
NEW RECIPE: Meal kit maker Blue Apron climbed 8.4 percent after it named a new CEO. The company has struggled since its initial public offering in June. The stock rose 25 cents to $3.24.
OIL SURGES: Benchmark U.S. crude New York rose 88 cents, or 1.5 percent, to $58.26 a barrel. Brent, the international standard, rose $1.05, or 1.7 percent, to $63.66 a barrel. On Thursday, the OPEC cartel and a group of allied oil-producing nations agreed to extend output cuts until the end of next year.
The pickup in oil prices helped lift energy stocks. Hess climbed $1.15, or 2.5 percent, to $47.03.
BONDS: Bond prices rose. The yield on the 10-year Treasury fell to 2.36 percent from 2.41 percent late Thursday.
CURRENCIES, GOLD: The dollar fell to 112.15 yen from 112.53 yen on Thursday. The euro strengthened to $1.1893 from $1.1896. The price of gold rose $5.60, or 0.4 percent, to settle at $1,278.80 an ounce.
MARKETS OVERSEAS: Major stock indexes in Europe closed lower. Germany's DAX fell 1.2 percent, while France's CAC 40 fell 1 percent. The FTSE 100 index of leading British shares lost 0.4 percent. Indexes in Asia were mixed. Japan's Nikkei 225 rose 0.4 percent. South Korea's Kospi fell less than 0.1 percent. Hong Kong's Hang Seng index slipped 0.4 percent. Australia's S&P/ASX 200 gained 0.3 percent.