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Trump’s health-care defeat pushes stocks lower

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The Dow Jones Industrial Average ended with losses for its eighth session in a row on worries the Trump administration can’t enact the growth initiatives promised.
Video provided by TheStreet
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Wall Street is giving President Trump a harder look.

Even before the fallout from the GOP’s failure on Friday to bring an Obamacare-replacement bill to a vote, U.S. stocks had been steadily declining in March, reflecting investors’ waning confidence in Trump’s ability to deliver on his campaign promises.

That fall continued Monday, with the Standard Poor’s 500 index ending the day down 0.1%.

The decline came during the first full day of trade after House Republican leaders pulled the American Health Care Act last week. Investors’ concerns arising from the withdrawal lingered Monday. The Dow Jones Industrial Average retreated 0.2%, its lowest level in six weeks. It also marked the Dow’s first 8-session losing streak since July 22 – Aug. 2, 2011, when the debt ceiling fight erupted in Washington, D.C. and just a few days before the AAA rating downgrade by Standard Poor’s.

Following Trump’s surprising victory in November, investors had driven share prices higher, betting that his promises to cut taxes, eliminate regulations and spend billions on infrastructure could stir corporate investment and inflationary pressures. But the “Trump trade” bounce has lost steam in recent weeks as investors reevaluate the president’s political capital and the sluggish pace of legislative developments in Washington, D.C. The SP 500 stock index has declined 2.3% since March 1, including a 2.39 point fall on Monday to 2,341.59.

The Dow fell 45.74 points to 20,550.98. By contrast, the Nasdaq Composite rose 11.64 points, or 0.2%, to 5,840.37.

Charlie Ripley, investment strategist for Allianz Investment Management, said the GOP’s failure to bring the bill to a vote showed that “the runway to pass legislation appears longer.”

Still, the  decision to pull the bill to replace Obamacare did not cause major havoc in the U.S. stock market. Investors are hoping that despite the political defeat, Trump and his economic team will pivot to other parts of his agenda that Wall Street feels are more important to the market’s long-term health.

“Much of the stock market rally since Election Day appeared to be based on the expectation that the president’s legislative agenda would face smooth sailing,” said Mark Hamrick, senior economic analyst at Bankrate.com. “So far, investors seem to have taken the rocky reception to the health-care legislation effort largely in stride. Even so, the moon shot for stock prices seen since early November was already due for a timeout before these latest developments.”

One bright spot for stocks was hospital companies. The bill’s defeat sent them soaring again Monday as continued insurance coverage for millions of Americans under Obamacare ensures busy hospital corridors. The health care sector, one the 11 industry groups in the SP, rose 0.3% Monday.

Shares of Community Health Systems (CYH) rose 1% to close at $9.64 after rallying about 10% on Friday. Tenet Healthcare was up 1.4% to $18.54. Universal Health Services climbed 3.3% to $125.97.

The hope now is that Trump will pay more attention to the parts of his plan that are more focused on getting the U.S. economy growing at a faster rate. Corporate tax reform tops the list, and investors have been pouring into stocks since Election Day in hopes that tax relief for Corporate America will deliver an earnings boost to companies.

Investors are also hoping the president’s focus will shift back to getting an infrastructure spending bill passed, as well as pushing through changes that will eliminate regulations of big and small businesses.

Still, the fear that Trump’s first legislative defeat will make it harder for him to get other priorities passed lingers.

“Trump’s first test will go down as a failure, which makes the second test a lot tougher,” JJ Kinahan, chief strategist at TD Ameritrade said, adding that the goings on in the nation’s capital continue to drive financial markets. “It is the No. 1 story.”

Kinahan, however, said the defeat of the GOP health care bill does not signal a death knell for the Trump rally. Tax cuts or tax reform will likely still happen even though they may be more difficult, he says. The rally won’t end unless the president’s tax proposals are also “shut down,” he says.

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