By Chuck Mikolajczak
NEW YORK (Reuters) – U.S. stocks pulled back on Monday in a broad decline as investors grew uneasy over the latest tumult surrounding the Trump administration and geopolitical tensions emanating from North Korea.
The S&P 500 has rallied about 11 percent in the wake of President Donald Trump’s victory in November, with investors betting on the implementation of reduced regulations, lower taxes and increased infrastructure spending.
However, a lack of detail on Trump’s proposals, his isolationist stance and setbacks in filling his Cabinet have caused some investors to question whether the post-election rally has run its course as stock valuations become stretched.
Trump accused predecessor Barack Obama on Saturday of wiretapping him during the late stages of the 2016 election campaign, but offered no evidence.
Some investors worried that the accusation could delay the implementation of Trump’s economic agenda.
“The bottom line is, investors have predicated this rally on this new administration getting things done,” said Jack Ablin, chief investment officer at BMO Private Bank in Chicago.
“The more news that circulates that is now whipping Washington into a frenzy, the less bandwidth they have to focus on getting these measures through.”
Adding to investor caution were rising tensions in East Asia after North Korea fired four ballistic missiles into the sea off Japan’s northwest.
Trump also signed a revised executive order on Monday for a 90-day travel ban to the United States from six Muslim-majority countries, removing Iraq from the list after his controversial first attempt was blocked in the courts.
Valuations are a growing cause for concern. The S&P 500 is trading at nearly 18 times forward earnings estimates against the long-term average of about 15 times, according to Thomson Reuters data.
Investors are also grappling with the likelihood of an interest rate hike by the U.S. Federal Reserve at its meeting next week, with traders now expecting about an 85-percent chance of a hike versus roughly 30-percent at the start of last week.
The Dow Jones Industrial Average <.DJI> fell 51.37 points, or 0.24 percent, to 20,954.34, the S&P 500 <.SPX> lost 7.81 points, or 0.33 percent, to 2,375.31 and the Nasdaq Composite <.IXIC> dropped 21.58 points, or 0.37 percent, to 5,849.18.
Of the 11 major S&P sectors, only energy <.SPNY>, up 0.29 percent, managed a modest advance.
Among stocks, Snap Inc <SNAP.N> tumbled 12.3 percent to $23.77 in its third day of trading, closing below the debut opening price of $24. A group representing large institutional investors has approached stock index providers S&P Dow Jones Indices and MSCI Inc, looking to bar Snap and any other companies that sell non-voting shares from being included in stock benchmarks.
Tyson Foods <TSN.N> dropped 2.5 percent to $61.99 after a strain of bird flu was detected in a chicken breeder flock on a Tennessee farm contracted with the company.
Declining issues outnumbered advancing ones on the NYSE by a 2.33-to-1 ratio; on Nasdaq, a 2.45-to-1 ratio favored decliners.
The S&P 500 posted 16 new 52-week highs and 7 new lows; the Nasdaq Composite recorded 61 new highs and 63 new lows.
About 6.18 billion shares changed hands in U.S. exchanges, below the 6.89 billion daily average over the last 20 sessions.
(Reporting by Chuck Mikolajczak; Editing by Nick Zieminski)