Stocks quickly fell Friday following former National Security Advisor Michael Flynn’s guilty plea in the investigation into Russian meddling in the 2016 election, with investors seeming particularly spooked by reports, which have yet to be confirmed, that Flynn is prepared to testify directly against President Donald Trump.
The S&P 500 fell nearly 1% to 2,614 as of midday Friday, while the Dow Jones Industrial Average also slipped from its all-time high, falling half a percentage point to 24,170.
ABC News, citing an unnamed source, reported that Flynn is prepared to testify Trump “directed him to make contact with the Russians.” Flynn has confirmed that he is cooperating with special counsel Robert Mueller as part of his guilty plea for lying to the FBI, and prosecutors indicated Flynn has already testified that Trump transition officials directed his contacts with Russians. But the ABC report, which suggested for the first time that Flynn will point the finger at Trump directly, sent shudders through a market that has been breaking record after record in recent months.
The S&P 500, which ended Thursday with a market capitalization of about $23.5 trillion, is likely billions of dollars lower.
Gold prices meanwhile, often considered a safe haven asset, rose 1% to $1,286 per ounce.
Still, markets rebounded slightly later in the day, as worries about the tax bill appeared to abate slightly.
“Although today’s Washington drama could cause some near-term volatility, the overall economy is on very firm footing and we don’t expect this to lead to a major dip,” said Ryan Detrick of LPL Financial.
Back in May, Kynikos Associates’ Jim Chanos also argued that markets have already largely priced in the possibility of a President Mike Pence, who is thought to follow along most of Trump’s economic agenda.