Comey Drops Bombshell, Teflon Dow Shrugs and Surges Higher

If investors were concerned about a James Comey bombshell, they did a good job of hiding it.

Wall Street largely shrugged off the former FBI director's nearly three-hour testimony before the Senate Intelligence Committee on Thursday, with the S&P 500 and Dow ending the day with modest gains and the Nasdaq finishing at a new record high. Stocks rose on Friday, even in the wake of the surprise U.K. election. Forget Teflon Don -- it's Teflon Dow.

"The market was bracing for something a bit more significant and a bit more unpleasant, and it doesn't seem to have presented itself," said Tim Holland, global investment strategist at Brinker Capital. "There was no bombshell, there was no proverbial smoking gun, and so it seems to be a situation of he said-he said. The market took that as a positive."

"ComeyGate has become a political Rorschach Test: we suspect if you were a Trump supporter before the hearing, you thought the hearing was a nothing burger and if you were a Trump critic, you thought it was Open Sesame. Both sides have used Comey as a political punching bag at various times over the past year, though seemed to cherry pick certain sections of yesterday's testimony with the precision of surgeons," said Cowen analyst Chris Krueger in a note Friday. "To paraphrase Churchill, now is not the end...the Comey testimony was not even the beginning of the end...it was probably the end of the beginning."

"Comey's testimony basically sent the message that there's nothing immediately that's going to happen to the administration, there's not enough there to cause the administration to fail in the near term," said Bob Phillips, managing principal at Spectrum Management Group.

"The hearing was similar to a 'choose your own adventure' book as the factions can embrace their preferred narrative and move to the next issue," said Compass Point analyst Isaac Boltansky in a Friday note. "We still remain skeptical regarding the potential for Congressional action against President Trump as the obstruction claims will be assessed through a political lens rather than a legal lens."

The next catalysts will be the Senate Judiciary Committee hearings for Christopher Wray, Trump's nominee to be the next head of the FBI, and the budget request by Robert Mueller, special counsel on Trump-Russia investigation, to the Department of Justice, Krueger said. The White House response will be key as well.

President Donald Trump on Friday morning tweeted his reaction to the testimony.

Despite so many false statements and lies, total and complete vindication...and WOW, Comey is a leaker!

— Donald J. Trump (@realDonaldTrump) June 9, 2017

Comey confirmed on Thursday that he had orchestrated the leak of his memo on a conversation with Trump.

While Comey might not have delivered a knockout blow, the "cloud" Trump asked him to help lift over his administration persists and will affect the White House's broader agenda.

"Comey's callout of Donald Trump's lies is likely to bog down an already struggling administration. The former FBI director said the U.S. president lied on several occasions, and he illustrated Trump's knack for self-sabotage," wrote Reuters Breaking Views' Gina Chon. "The fresh hits to his credibility can only further hobble the White House's economic agenda."

"We continue to believe that the Russia investigation will be an overhang for the foreseeable future as Congress appears to be moving with all deliberate speed and the average length of special prosecutor's investigation is three years," Boltansky said. "Meanwhile, the Congressional calendar continues to march forward as both chambers are currently scheduled to be in session for only 27 more days before the August recess."

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