Wall Street swoons on Tillerson firing, tech losses

US and European stock indexes closed down on Tuesday, pressured by losses in technology stocks and US President Donald Trump's ouster of Secretary of State Rex Tillerson.

Sagging equities, in turn, weighed on the dollar and crude oil prices. The possibility of additional tariffs on China, which made news late in the day, may have also dragged stocks down across sectors.

“Technology rallied hard yesterday and last week, and there is profit-taking, but it’s just a short-term pressure,” said Ken Polcari, director of the NYSE floor division at O'Neil Securities in New York.

Falling stock prices pressured oil futures, which fell as much as 1.8 per cent before regaining some ground. Oil lately has trended in tandem with equities and remains under pressure from nagging concerns over rising US production.

Trump ousts Tillerson

Trump gave Tillerson the boot after a series of public rifts over policy on North Korea, Russia and Iran, and replaced his chief diplomat with Central Intelligence Agency Director Mike Pompeo.

The move contributed to a volatile morning across asset classes, but markets began trending decidedly in the red by the afternoon.

US crude fell 0.83 per cent to $60.85 per barrel. Brent was last at $64.69, down 0.4 per cent on the day.

Energy investors initially saw Tillerson's firing as a sign that a deal on Iran's nuclear programme could collapse, potentially cutting that country's oil output. This view supported prices for awhile but could not overcome lingering fears about rising US production.

“There is no stopping us and OPEC's frustration levels are going to grow,” said Phillip Streible, senior market strategist at RJO Futures in Chicago, referring to efforts by major producers to curb output.

US crude output has reached a record, and weekly data last week showed overall US output rising further.

The Dow Jones Industrial Average fell 171.58 points, or 0.68 per cent, to 25,007.03, the S&P 500 lost 17.71 points, or 0.64 per cent, to 2,765.31 and the Nasdaq Composite dropped 77.31 points, or 1.02 per cent, to 7,511.01.

Stocks slid as shares of Microsoft, Facebook and Alphabet were down more than 1.5 per cent each, top losers on the S&P 500 and the Nasdaq.

Equity markets had opened higher after the US Labor Department announced its Consumer Price Index rose 0.2 per cent in February. The data, in line with economists’ expectations, suggested the Federal Reserve remains on track to raise interest rates at a gradual pace.

But “there's a lot of noise coming out of Washington over all these changes that’s causing the markets to really not focus,” said Ken Polcari, director of the NYSE floor division at O'Neil Securities in New York.

China tariffs

Potentially compounding the strain were revelations that Trump is seeking to impose tariffs on $60 billion of Chinese imports and will target the technology and telecommunications sectors.

“I don't think China wants to engage in a tariff war, however, this may be upsetting the apple cart,” said Bryan Novak, senior managing director at Astor Investment Management in Chicago. “There could be some anxiety around it. It’s really hard to place value on this right now.” European stocks closed down across the board. The pan-European FTSEurofirst 300 index lost 1.00 per cent and MSCI's gauge of stocks across the globe shed 0.38 per cent.

Emerging market stocks rose 0.13 per cent.

The dollar index, which measures the greenback against a basket of currencies, fell 0.2 per cent, with the euro unchanged at $1.2389.

In US Treasuries, benchmark 10-year notes last rose 7/32 in price to yield 2.8444 per cent, from 2.87 per cent late on Monday.

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