Messy political developments in Washington, D.C., spilled into financial markets on Wednesday in the most punishing day for stocks of 2017.

The S&P 500 was down 1.8%, the Dow Jones Industrial Average fell 1.8%, or 372 points, and the Nasdaq slid 2.6%. The S&P 500's loss was the worst since Sept. 9.

The Donald Trump scandal that provoked Wednesday's selloff was the second of the week: A New York Times report that Trump asked former FBI Director James Comey to shut down the federal investigation into since-ousted National Security Adviser Michael Flynn. Flynn was forced to resign on Feb. 13 amid questions over his contact with the Russian ambassador and discussions of U.S. sanctions.

Comey wrote a memo detailing his conversation with the president shortly after it took place, according to the Times, which cited two people who read the document. It's part of a paper trail Comey created documenting what he believed to be improper efforts to influence the investigation. The president fired Comey, who was heading an investigation into the Trump campaign's alleged ties with Russia, early last week. 

The Times report may present the clearest evidence yet that the president has tried to influence government investigations into links between Russia and the Trump campaign.

"The problem is not the turmoil, not the potential constitutional issues, and not even the ongoing tug of war between Republicans and Democrats," said Brad McMillan, chief investment officer for Commonwealth Financial Network. "The problem is that the markets have expected significant policy action on the economy, and such action is looking less likely by the day, given the many political items that need to be resolved first."

Financial stocks were the worst performers on Wednesday. JPMorgan (JPM) , Wells Fargo (WFC) , Bank of America (BAC) , HSBC (HSBC) , Citigroup (C) , and Goldman Sachs (GS) were sharply lower, while the Financial Select Sector SPDR ETF (XLF) slid 3.2%.

Wells Fargo and Citigroup are holdings in Jim Cramer's Action Alerts PLUS Charitable Trust Portfolio. Want to be alerted before Cramer buys or sells WFC or C? Learn more now.

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