Wall Street cares about one thing and one thing only out of Washington: tax cuts. And anything that gets in the way of that -- including President Trump's shocking Tuesday-evening firing of FBI Director James Comey -- is bound to make investors nervous.
Stocks opened lower on Wednesday, with the Dow, S&P 500 and Nasdaq sinking mildly as safe-haven gold ticked upwards. The VIX index, the stock market's so-called "fear gauge" ticked upwards at market open before ticking back down to near-multi-year lows.
In other words, while investors aren't panicking over Comey's ouster and what it means for the rest of the Trump agenda, they're not particularly enthusiastic about the recent events, either.
Wall Street is anxious that turmoil over Comey, efforts to pick his replacement and the ongoing investigation into ties between Russia and the Trump campaign could push the tax reform it's been banking on even farther into the future.
"Our sense is that the dismissal of Director Comey in and of itself is far from a shock, but the timing is inconceivably curious and the political ripples from this action will further complicate President Trump's Congressional agenda," said Compass Point analyst Isaac Boltansky in a note on Wednesday. "This dismissal will certainly slow legislative progress on tax reform and other pro-growth measures as Congressional Republicans will spend the coming weeks either deflecting or defending the decision."
"I think the biggest issue is what this does to the Trump agenda in taxes," said Matthew Peterson, chief wealth strategist for LPL Financial. "The market really is expecting a cut. We still feel it's a matter of when, not if a cut happens. But any thought this gets pushed to '18 is a market negative."
Concerns that tax reform might be farther on the horizon than anticipated have already been on the rise among some analysts and investors, due in part to renewed attention to health care reform on Capitol Hill. The House of Representatives voted on the American Health Care Act to repeal and replace Obamacare last Thursday.
"While we still think a tax cut is more likely than not, it is a closer call than it was a few weeks ago and it is likely to take until 2018; enactment by the end of this year now looks quite unlikely, in our view," Goldman Sachs analyst Alec Phillips said in a Wednesday note.
Height Securities analyst Peter Cohn took a more optimistic view of Comey's firing, arguing that while it is "yet more evidence of this commander-in-chief's volatility and unpredictability" and "unnerving" for world leaders and investors, it won't cause unforeseen problems in health care and tax reform.
"Comey will end up being a political story for the ages and cocktail party outrage fodder for many months to come," he said in a Wednesday note. "But we think Trump will remain in the Oval Office, barring some major new revelation with regard to the Russia investigation, and the legislative agenda will be unaffected."
RealMoney's James DePorre warned on Wednesday that the Comey firing could put a damper on fiscal policy hopes, though he stopped short of calling an end to the bull market. "This isn't a significant financial event, but it concerns the market because it causes some political distraction at a time when it is hoping that President Trump's fiscal policy plans will advance at a faster pace," he said.
Democrats are calling for a special prosecutor to handle the investigation into the Trump team's Russia ties from here on out. But Senate Majority Leader Mitch McConnell on Wednesday indicated he's not interested in making such a move.
"Today we'll no doubt hear calls for a new investigation, which could only serve to impede the current work being done," McConnell said speaking from the Senate floor.