Patience with the slow progress of health care and financial reforms wore thin on Tuesday, sending stocks spiralling to their worst losses of the year.
The S&P 500 declined 1.24%, the Dow Jones Industrial Average fell 1.14% and the Nasdaq slid 1.83%. The S&P 500 has not declined by 1% in 109 sessions. Defensive utilities and consumer staples stocks were the only sectors in the green on Tuesday.
Uncertainty over when and how the Trump administration will implement regulatory reform spooked the financial sector. The financial sector was one of the worst performers on Tuesday, continuing its decline from a day earlier. Bank of America (BAC - Get Report) , JPMorgan (JPM - Get Report) , Wells Fargo (WFC - Get Report) , and Citigroup (C - Get Report) declined, while the Financial Select Sector SPDR ETF (XLF - Get Report) dropped 2.9%.
Banking stocks spiked in the aftermath of the election on promises from Donald Trump and his administration that financial rules and regulations would be relaxed. The markets have grown restless the longer the Trump White House goes without a hint of a reform plan.
"There's a degree of uncertainty over the extent and magnitude and timing of any regulatory reform that the Trump administration plans to put forward -- so far they've just punted," Cathy Seifert, director of financial institution research at CFRA Research, said in a phone call. "If [health care reform] is an indication of how regulatory reform is going to go, we've got a lot of headaches ahead of us."
Trump headed to Capitol Hill on Tuesday for a closed-door meeting to pressure House Republicans to vote for his Obamacare repeal and replace bill. Trump reportedly told lawmakers that their seats would be on the line in 2018 if they did not back the bill.
House Republicans are set to vote on the American Health Care Act on Thursday. Speaker Paul Ryan's bill, designed to replace the Affordable Care Act, has been widely criticized on both sides of the aisle. The Congressional Budget Office calculated that 24 million more people will be uninsured by 2026 under the Republicans' bill, including 14 million more by 2018. Premiums are expected to jump 20% in the individual market in 2018 and 2019.
Some analysts retained faith in the staying power of the Trump rally, betting that reforms would eventually make their way down the pipeline as the administration has promised.
"Our view is that the market is taking a pause and ultimately many of the pro-growth policies that are expected from this administration will get done and many of those reflation trades will again take hold," Chris Zaccarelli, chief investment officer for Cornerstone Financial Partners, told TheStreet. "In the meantime we are going to be in for some volatility until we get more clarity from the Congress on what will get passed and when it will happen."
The basic materials sector was also sharply lower on Tuesday. Industry leaders including BHP Billiton (BHP) , Rio Tinto (RIO) , Vale (VALE - Get Report) and LyondellBasell (LYB - Get Report) were all sharply lower, while the Materials Select Sector SPDR ETF (XLB - Get Report) fell 1.6%.
Stocks had posted modest gains when markets opened Tuesday with the Nasdaq even reaching intraday records. Markets had mostly been stuck in a holding position since a big rally last week following the Federal Reserve's decision to hike rates.
"Since hitting new highs on March 1 the indices have done little," said James "Rev Shark" Deporre in his column for RealMoney, our premium site for investors. "There was a brief flurry of buying following the Fed interest rate decision last Wednesday, but it has been very sloppy action within a tight trading range ... The bullish spin on this dull action is that it is healthy consolidation that is a set up for another thrust higher."
Apple (AAPL - Get Report) fell 1.1% but touched new record highs earlier Tuesday after announcing the launch of its 9.7-inch iPad and a special "red" edition of its iPhone 7 and iPhone 7 Plus. Apple's "red" products are part of its campaign to raise funds for the fight against AIDS. The special edition smartphones will be available in stores on March 24.
Related: Apple Debuts New iPhone 7 Cases
Crude oil prices fell on Tuesday after settling at a near one-week low a day earlier. Prices have been under pressure on signs of ballooning U.S. stockpiles and an uptick in global production. Weekly data on Friday showed another increase in oil-drilling rig activity in the U.S.
West Texas Intermediate crude slid 1.8% to $47.34 a barrel on Tuesday.
"Crude oil prices are still suffering from its last technical breakdown, from which it will take a bit more time to recover," said Peter Cardillo, chief market economist at First Standard Financial. "Despite increasing levels of domestic production, we continue to see a rebalancing of the market in the second half of the year with prices trading between $60 and $65."
Wall Street Goes to Washington: In the first of a series of conversations with the President's economic advisors, acclaimed author and columnist Michael Wolff will sit down with Anthony Scaramucci, co-founder of private equity firm Skybridge Capital, to discuss the Trump administration, his thoughts on policies and regulations under debate and his outlook for the next four years. Join us for this cocktail party on Monday, March 27 at The Metropolitan Club in New York. The event is free, but seating is limited and reservations are required. For more information or to RSVP, email firstname.lastname@example.org.