Messy travel ban rollout dings stock market surge

The messy and contentious rollout of the executive order blocking entrance for refugees and travelers from seven majority-Muslim nations has dented the stock market surge enjoyed by President Trump since his election.

Ever since winning the White House in early November, Trump has ridden a wave of stock market success as investors prepared for the business-friendly policies that could come from a Washington controlled entirely by the Republican Party.

{mosads}But the messy rollout of the order, which barring people from Iran, Iraq, Syria, Yemen, Sudan, Somalia and Libya from traveling to the U.S. for at least 90 days and suspending refugee admissions from all countries for four months and from Syria indefinitely is taking its toll.

The Dow Jones industrial average has fallen roughly 225 points, or 1.1 percent, in the two days of trading since Trump announced the travel ban on Friday evening. And corporations, long wary of attracting Trump’s ire, began to speak out against the policy as protests popped up at airports across the country.

The selloff is a modest chip in the roughly 1,500-point rally the Dow has enjoyed since Trump won the election. But it shows that while the private sector eagerly awaits tax cuts and trimmed regulations, there could be agenda items from this White House that are seen as a setback.

“When you have these mishaps, if that’s what you want to call it, at the White House, that gets people a little worried,” said IHS Global Insight Economist Chris Christopher. “But for the most part things are holding up relatively well.”

The two-day selloff is one of the first market bruises for Trump since he shocked the world by winning the White House.

Investors, convinced Trump could be a boon to the private sector, pushed the Dow to a 9 percent surge since Election Day, with the Dow closing above 20,000 last week for the first time in its history.

Trump has hailed the stock market surge as an endorsement of his policies — and predicted there was more growth to come.

“People say, ‘Oh the market is going to go down.’ The stock market is not going to go down,” he said last Monday in a meeting with small business owners.

But the turmoil and drama that consumed the weekend after Trump unveiled his travel ban has put a dent in some of that optimism.

Investors see several reasons for caution from the developments of the past few days.

For one, there is a direct business impact. Corporations across the country reacted with concern to the proposal, aware that members of their workforces could be affected by the new restrictions.

The pushback was particularly acute in the tech sector, which often relies on talent from abroad for key positions. Companies such Google and Netflix criticized the policy, as did companies ranging from Ford to Goldman Sachs.

But there are broader concerns at play.

Trump’s executive order on travel made clear that he had every intention of following through on his campaign promises — including those that have Wall Street worried.

“You do have to take him literally,” said Brian Gardner, managing director at Keefe, Bruyette & Woods. “You now have to take Trump’s threats about NAFTA and different tariffs and border literally.

“Go back and look at the market performance during his inaugural address,” he added. “There was a quick selloff during the early part of the address … a market reaction of, ‘My God, he really means this stuff.’ ”

Aside from the policy specifics, there also is growing concern about the administration’s ability to do its job effectively, given the wide confusion and reported miscommunications about the particulars and implementation of the new rules. Speaker Paul Ryan (R-Wis.), for example, said Tuesday he only found out about the rule as it was being made public.

“When they don’t consider all the ramifications, if it’s a little bit rushed, people will feel nervous,” Christopher said.

But perhaps the most significant risk is that the first two weeks of Trump’s administration have seen partisan differences only deepen, with Democrats digging in even further against the new administration after Friday’s executive action.

Democrats went so far as to boycott a committee vote on a pair of Trump’s nominees Tuesday and appear to be using every delaying tactic in their arsenal to slow down many of his top picks.

With investors eager for actions that will require some bipartisan buy-in, such as an infrastructure package and tax reform, the incredibly rocky start to the new Congress is a concern.

“It certainly is going to make it tougher for policy changes to occur,” Gardner said.

“Democrats are going to dig in. … There doesn’t seem to be any fear of political reprisal for opposing the administration.”