U.S. stocks veered sharply lower as investors worried that former national security adviser Michael Flynn’s guilty plea to lying to the FBI could spell trouble for the White House and its legislative agenda, including a tax overhaul currently under debate in Congress.
Flynn says he will cooperate with investigators in the probe into Russian meddling in the U.S. presidential election. Small-company stocks, which would benefit the most from corporate tax cuts, fell far more than the rest of the market. The Russell 2000 index plunged 2.2 percent.
In other signs that investors were feeling unsettled, bond prices rose sharply, the dollar weakened, and the price of gold rose.
KEEPING SCORE: The Standard & Poor’s 500 index fell 20 points, or 0.8 percent, to 2,627 as of noon Eastern Time, erasing its gain from a day earlier. The Dow Jones industrial average slid 139 points, or 0.6 percent, to 24,125. The Nasdaq composite lost 78 points, or 1.1 percent, to 6,796. The Russell 2000 index of smaller-company stocks gave up 25 points to 1,515. The indexes had been little changed before Flynn’s plea deal was announced.
RUSSIA PROBE: A federal judge said that Flynn is cooperating with the wide-ranging investigation led by special counsel Robert Mueller. In pleading guilty Friday to lying to the FBI about his contacts with the Russian ambassador, Flynn admitted he followed directions from an unnamed member of the Trump transition team. Mueller is examining possible coordination between Russia and the Trump campaign to influence the outcome of the 2016 election. Flynn is the first official who worked in the Trump White House to make a guilty plea in the investigation.
TAX CUTS: Investors were keeping an eye on Washington as Republicans moved to make major changes to their proposed tax overhaul package ahead of a vote Friday. Among the changes aimed at appeasing deficit hawks is a rollback of some of the tax cuts after six years. The legislation is expected to add $1 trillion to the nation’s deficit over 10 years. It would also slash the corporate tax rate, offer more modest cuts for families and individuals and eliminate several popular deductions.
TECH SLIDE: The technology sector, an investor favorite since the beginning of the year, had some of the biggest losses. Qorvo fell $4.13, or 5.4 percent, to $72.45.
NOT QUITE YET: Qualcomm declined 1.8 percent after Bloomberg News reported that Broadcom, a rival chipmaker, won’t make a new offer for the company…