S&P 500; US Indexes Fundamental Daily Forecast – Stocks Tumble as Republicans Delay Health Care Reform Vote

After trading relatively flat most of the session, the blue chip Dow Jones Industrial Average and benchmark S&P 500 Index are finally rolling over to the downside in response to comments from Fed Chair Janet Yellen and the news that Senate Republicans will delay the vote on the health-care bill until after the Fourth of July recess.

The tech-based NASDAQ Composite, on the other hand, has been under pressure from the opening and is extending those losses as Yellen speaks in London. The index is being primary pressured by a drop in Alphabet stock, the parent of Google. It is coming under pressure after EU antitrust regulators hit the company with a record $2.7 billion fine.

The NASDAQ started out weaker on Tuesday and the selling pressure spread to the other major indexes, putting a cap on any gains by the Dow Jones Industrial Average and the S&P 500 Index.

Alphabet (Google) was the catalyst behind the selling pressure. The stock and the index lost ground from the get-go on Tuesday, following Monday’s dramatic technical reversal as traders responded to the news that the European Commission had fined the tech-giant 2.42 billion Euros ($2.7 billion) after it ruled the company had abused its power by promoting its own shopping comparison service at the top of search results.

The amount is the regulator’s largest penalty to date against a company accused of distorting the market.

At the mid-session, Philadelphia Fed President Patrick Harker said he sees the Fed on track to raise rate once more this year.

“I’m sticking to my outlook that we’re on the right path,” Harker told the European Economics and Financial Centre in London, according to prepared remarks. “In the case of inflation, I’ve seen the factors exerting downward pressure as temporary.”

Fed Chair Janet Yellen said Tuesday that banks are “very much stronger” judging by how major institutions did in the recent stress tests.

Yellen also made a bold prediction: that another financial crisis the likes of the one that exploded in 2008 was not likely “in our lifetime.”

Investors are no waiting to see if she comments on monetary policy and the future of interest rate hikes. Given the hawkish comments from FOMC Member Patrick Harker earlier today, it would come as a shock to the markets if Yellen didn’t reiterate what she said after the last Fed rate hike earlier in the month. This means she is likely to say that the current economic weakness is only temporary and that the Fed is likely to raise rates at least once in 2017 and perhaps as many as three times in 2018.

I think most of the late session selling in the stock market is related to the Senate Republican’s announcement that they will delay the vote on their Obamacare replacement bill until after July 4. This is probably because they don’t have the votes.

Investors are selling stocks because they believe the inability to pass healthcare reform will mean another delay in President Trump’s tax reform plan and aggressive infrastructure spending program.