Wall Street Reverses Course as FBI Reopens Clinton Email Investigation

Oct 28 2016 | 3:34pm ET

by Hilary Russ and Chuck Mikolajczak (Reuters) - Wall Street fell broadly on Friday, with U.S. stocks and the dollar lower after the Federal Bureau of Investigation said it would probe additional emails related to Democratic presidential candidate Hillary Clinton's use of a personal email server while secretary of state.

The dollar slipped against major currencies, including the Euro and the yen, while the Mexican peso plunged to a three-week low.

"The market turned south the minute the headline hit the tape that the FBI is all of a sudden looking at (Hillary Clinton's) emails again," said Ken Polcari, director of the NYSE floor division at O’Neil Securities in New York.

"The fact they are looking again just raises the prospect that once again they might find something, so the market turned south because it is expecting a Clinton win," he said.

The Dow Jones industrial average rose 20.04 points, or 0.11 percent, to 18,189.72, while the S&P 500 lost 4.44 points, or 0.21 percent, to 2,128.6 and the NASDAQ Composite dropped 19.76 points, or 0.38 percent, to 5,196.21.

Stocks and government debt yields had been higher, cheered by stronger-than-expected growth in the world's biggest economy that boosted bets on an imminent U.S. interest rate increase, while oil extended losses amid a persisting global glut.

The yield on benchmark 10-year Treasury notes slipped briefly after the FBI news but later flattened to 1.8486 percent.

Oil prices were set for their biggest weekly losses in six weeks on investor doubts over OPEC's planned output cut and ahead of U.S. rig count data that has steadily increased in the last few months.

Brent crude was down 1.04 percent, or 81 cents, at $49.66 a barrel at 2 p.m. ET (1800 GMT), and U.S. crude was 2.05 percent, or $1.01, lower at $48.70.

The U.S. dollar reversed course, dropping 0.57 percent against a basket of major currencies. It fell 0.68 to 104.61 against the yen after earlier touching a three-month high of 105.50.

The Mexican peso also plunged on the FBI news. The dollar surged about 1 percent against the peso to a three-week high of 19.1002 pesos.

Earlier in the day, an estimate of U.S. second-quarter gross domestic product showed annualized economic growth of 2.9 percent, the fastest rate in two years. However, the boost came largely from a recovery in inventories and a jump in agricultural exports after poor soy harvests in Argentina and Brazil this year benefited sales by American exporters.

Meanwhile, business investment in equipment contracted for a fourth straight quarter and personal consumption growth slowed to 2.1 percent from 4.3 percent.

Europe's index of leading 300 shares closed down 0.35 percent; Germany's DAX slipped by 0.19 percent and the STOXX 600 fell 0.27 percent.

MSCI's global stock index reversed, falling 0.12 percent. Its broadest index of Asia-Pacific shares outside Japan was down 0.36 percent, pressured by the prospect of easy money flows being crimped should the U.S. Federal Reserve tighten policy.

YIELDS CLIMB

In a week marked by deep slides in prices of U.S. and European debt, the benchmark 10-year Treasury yield climbed earlier on Friday to a five-month high, just below 1.88 percent, helped by surging British gilt and German bund yields.

Bond yields have risen recently amid concerns the ultra-easy policies of major central banks could have their limits and may not be continued indefinitely.

The robust U.S. GDP data for the third quarter helped pushed Treasury yields higher, with the rates futures markets pricing in a more than 80 percent chance the Federal Reserve would tighten rates at its December policy meeting.

Germany's 10-year bund yield earlier rose to 0.219 percent, its highest since early May. It later reversed course, with prices rising and the yield falling to 0.17 percent.


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