Fri | Sep 21, 2018

US stocks sink after ex-Trump adviser Flynn pleads guilty

Published:Sunday | December 3, 2017 | 12:00 AM
Michael Flynn

US stocks veered sharply lower as investors worried that former national security adviser Michael Flynn's guilty plea to lying to the FBI could spell trouble for the White House and its legislative agenda, including a tax overhaul currently under debate in Congress.

Flynn says he will cooperate with investigators in the probe into Russian meddling in the US presidential election. Small-company stocks, which would benefit the most from corporate tax cuts, fell far more than the rest of the market. The Russell 2000 index plunged 2.2 per cent.

In other signs that investors were feeling unsettled, bond prices rose sharply, the dollar weakened, and the price of gold rose.

The Standard & Poor's 500 index fell 20 points, or 0.8 per cent, to 2,627 as of noon Eastern Time, erasing its gain from a day earlier. The Dow Jones industrial average slid 139 points, or 0.6 per cent, to 24,125. The Nasdaq composite lost 78 points, or 1.1 per cent, to 6,796. The Russell 2000 index of smaller-company stocks gave up 25 points to 1,515. The indexes had been little changed before Flynn's plea deal was announced.

A federal judge said that Flynn is cooperating with the wide-ranging investigation led by special counsel Robert Mueller. In pleading guilty on Friday to lying to the FBI about his contacts with the Russian ambassador, Flynn admitted that 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.

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. The legislation 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 technology sector, an investor favourite since the beginning of the year, had some of the biggest losses. Qorvo fell $4.13, or 5.4 per cent, to $72.45.

Qualcomm declined 1.8 per cent after Bloomberg News reported that Broadcom, a rival chipmaker, won't make a new offer for the company until next year. Qualcomm fell $1.18 to $65.16. Broadcom lost $12.94, or 4.7 per cent, to $265.

Ulta Beauty slid 9.1 per cent 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 $20.19 to $201.52.

Meal kit maker Blue Apron climbed 6.4 per cent after it named a new CEO. The company has struggled since its initial public offering in June. The stock rose 19 cents to $3.18.

Benchmark U.S. crude New York rose $1.41, or 2.5 per cent, to $58.81 a barrel. Brent, the international standard, rose $1.39, or 2.2 per cent, to $64.02 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 $1.43, or 3.1 per cent, to $47.31.

- AP