Stocks slip in wake of Donald Trump's travel ban

Last Updated Jan 30, 2017 5:18 PM EST

Stocks slid Monday after President Donald Trump restricted immigration from seven Muslim-majority nations, a move that underscored the administration’s proposals to erect barriers to foreign trade.

The retreat pulled the Dow Jones industrial average below 20,000, a milestone it had hit only last Wednesday amid the market rally that has greeted Mr. Trump’s ascension to the presidency. At Monday’s market close, the Dow was down 0.6 percent, to 19,922. The S&P 500 index also was off 0.6 percent and the Nasdaq composite index percent descended 0.8 percent.

European markets also closed markedly lower. Britain’s FTSE 100 slid 0.9 percent, Germany’s DAX drooped 1.1 percent and France’s CAC 40 stumbled 1.1%.

The president’s quick action, while in keeping with his campaign rhetoric, nevertheless took many investors by surprise and deepened unease and uncertainty about the U.S.’s economic landscape in the Trump era.

The shock value of Mr. Trump’s sudden action unsettled the markets, said Andy Kapyrin, director of research at RegentAtlantic Capital in Morristown, N.J. “He shoots from the hip and investors realized that the checks and balance” in Washington are not restraining him, Kapyrin said. In a week or so, he said, “cooler heads” in Washington should prevail and the markets will adjust.  

While the travel ban is not directly linked to economic matters, it highlighted in investors’ minds that the White House is serious about trade protection, noted Kevin Nicholson, chief market strategist at RiverFront Investment Group in Richmond, Va. 

In Mr. Trump’s first week in office, he and his team spoke of slapping a 20 percent tariff on Mexican goods and, amid the rancor,  a meeting between the president and Mexico’s leader was scratched. There also was talk of punitive measures against China, and even preventing Chinese access to the naval bases it is building in the South China Sea.

Although the Trump decision unnerved some investors, Nicholas Atkeson, managing director at US Capital Wealth Management in San Francisco, said he views the market pullback as a corrective action after a strong rally. “Some 80 percent of the stocks we follow are overbought,” he said. Atkeson pointed out that expectations for corporate earnings, now being reported, are good -- which should help stocks up ahead.  

Three sectors that had benefited a lot in the post-election rally endured the biggest falls on Monday. For the S&P 500, they were financials (down 0.8 percent), energy (off 1.8 percent) and materials, like steel and cement (negative 1 percent). “This is a healthy pullback,” said Eric Marshall, a portfolio manager for the Hodges Funds.”We’ve been 150 days without a 5 percent correction, the second longest in a decade.”

Air carriers on Monday saw their shares fall sharply on the news of the travel ban. American Airlines (AAL) was down 4.4 percent, Delta Air Lines (DAL) dropped 4.1 percent and United Continental Holdings (UAL) dipped 3.6 percent. 

Another factor, of course, was Sunday’s crippling computer outage at Delta that forced the cancellation of at least 150 flights.Delta flights resumed Monday. The Sunday incident  followed a similar problem at United a week ago, which grounded much of its domestic fleet, and another in October.

On the Dow, the stock with the largest weighting, Goldman Sachs (GS), dropped 1.4 percent, while the biggest loser was chemical maker du Pont (DD), which was down 2.2 percent.

  • Larry Light

    Larry Light is a veteran financial editor and reporter who has worked for the Wall Street Journal, Forbes, Business Week, Money, AdviceIQ and Newsday.