U.S. Stocks Plunge On Concerns Trump May Be Implicated in Russian Probe

U.S. financial markets went on a wild ride on Friday, driven initially by a delay in the vote on U.S. tax reform and later in the session by reports Michael Flynn may implicate President Donald Trump in the Mueller Russian investigation.

In the early hours of Saturday morning, the Senate Republicans narrowly passed a bill to overhaul the American tax system. With a vote of 51 to 49, the GOP navigated Republican Party fractures to approve a plan that Senators were still scraping together in the hours before the vote.

The vote brings Republicans closer to their promise of dramatically overhauling U.S. tax laws. However, the GOP still needs to overcome significant issues with the House of Representatives’ plan to craft a joint bill and send it to President Trump’s desk so that he can sign it into law before Christmas.

On Friday, Lieutenant General Michael Flynn pleaded guilty to knowingly making materially false, fictitious and fraudulent statements to FBI agents, in a plea hearing in a Washington, D.C. federal court. Investors were worried that Flynn would testify that he was directed by the Trump administration to make contract with the Russia.

U.S. Economic News

Final Manufacturing PMI was 53.9, slightly above the 53.8 Forecast. The major ISM Manufacturing PMI report fell short of expectations with a reading of 58.2 versus a 58.4 reading.

Construction Spending rose 1.4%, beating the 0.5% estimate. ISM Manufacturing prices came in at 65.5 and Total Vehicle Sales met expectations at 17.5 million.

Dallas Fed President Robert Kaplan said the U.S. Federal Reserve should raise rates in December, due to high employment and upward inflation pressure. “We ought to be taking one more step in the near future in raising rates,” Kaplan said at an economic development conference. “I’ll be in favor of taking the next step in removing accommodation in the near future,” Kaplan added.

Philadelphia Fed President Patrick Harker said, the Federal Reserve’s goals include promoting inclusive “economic opportunity” for Americans of all income levels.

“Our mission is really about creating an environment that promotes economic growth that is sustainable in the long term and that provides economic opportunity for everyone, (which) means we want growth that is inclusive and accessible across all income groups and communities,” Harker said in prepared remarks to a conference on revitalizing cities.

U.S. Equity Markets

U.S. stock markets closed lower on Friday after ABC News reported that former national security adviser Michael Flynn was directed by President Trump to talk to Russians triggered a volatile reaction. ABC said later in an updated report that Flynn will say Trump asked him to make contact with Russia “initially as a way to work together to fight ISIS in Syria.”

In a statement, Flynn said he agreed to “cooperate with the Special Counsel’s Office reflect a decision I made in the best interests of my family and of our country.”

The Dow Jones Industrial Average briefly dropped 350.45 points on the news. The S&P 500 Index fell as much as 1.4 percent on an intraday basis and the NASDAQ Composite dropped as much as 1.99 percent at its session lows.