Market Extra: Stock market, dollar rattled after Gary Cohn resigns from Trump White House


U.S. stock benchmarks looked set to open sharply lower after Gary Cohn, the head of President Donald Trump’s National Economic Council, resigned late Tuesday.

Cohn, a former Goldman Sachs Group Inc. GS, +1.45%  executive, has been viewed by Wall Street participants as a level head within an administration that has viewed by some critics as one in turmoil.

Cohn is regarded as the chief architect of Wall Street-friendly corporate tax cuts signed into law last year and his decision to leave the role as the president’s top economic adviser underlines a fear that Trump, who last week announced global tariffs on aluminum and steel, is adopting protectionist stance, which many strategists and traders view as a threat to the economic expansion should they spark a global trade war.

Cohn was increasingly on the outs, according to news reports and viewed as part of a so-called globalist faction in the Trump administration, attempting to moderate efforts to impose protectionist trade policies.

According to The Wall Street Journal, Cohn had lost an intense battle over trade with Peter Navarro, another key presidential adviser seen as an architect of the tariff plan.

Investors had previously fretted over Cohn’s fate, with stocks temporarily dipping in August on fears he would leave the White House after disagreeing with Trump’s remarks in the wake of deadly violence surrounding a white-supremacist rally in Charlottesville, Va.

How market participants responded

“Since the Trump administration came into being, Gary Cohn was seen as being supportive for the stock market, and the thought was that if Gary Cohn wasn’t in the White House the stock market would collapse,” said Douglas Borthwick, managing director at Chapdelaine Foreign Exchange.

Borthwick, however, said he disagrees with that assessment and doesn’t think the departure will do lasting damage. “Investors will pay attention to who will be chosen to succeed Cohn, but the market doesn’t appear to be focused on any individual,” he said.

“Obviously, S&P 500 futures down shows that the market had a lot of trust in [ Cohn’s] judgment and he built a lot of credibility on Wall Street over the years,” said J.J. Kinahan, chief market strategist at TD Ameritrade. “He was viewed as the calmer head that would prevail in the [Trump administration],” he said.

“Right now, the market is disappointed but one player’s not going to change the outlook for the economy, I would say the market is overreacting and I would buy the dip,” said Doug Cote, chief market strategist at Voya Investment Management.

“Sorry to lose him but life goes on,” he said

Via Twitter late Tuesday, Cohn’s former boss, Goldman Chief Executive Lloyd Blankfein, said Cohn “deserves credit for serving his country in a first class way. I’m sure I join many others who are disappointed to see him leave,”

How market benchmarks reacted

Futures on the Dow Jones Industrial Average YMH8, -1.70%  tumbled 417 points, or 1.7%, to 24,435, while S&P 500 index futures ESH8, -1.45% retreated 38 points, or 1.4%, at 2,686. Nasdaq-100 futures NQH8, -1.53% declined by 101.25 points, or 1.5%, to 6,806.75.

If they hold, the declines are set to erase year-to-date gains for the Dow DJIA, +0.04% which rose 9.36 points to 24,884.12 in regular trade Tuesday, while the The S&P 500 SPX, +0.26% climbed 7.18 points, or 0.3%, to 2,728.12. The Nasdaq Composite Index COMP, +0.56% meanwhile, gained 41.30 points, or 0.6%, to 7,372.01.

The U.S. dollar, as gauged by the ICE U.S. Dollar Index DXY, +0.09% which measures the buck against a half-dozen currencies, weakened substantially, off 0.7% to 89.43. The dollar was off versus the Japanese yen USDJPY, -0.43%  in Asian dealings, falling to ¥105.61 versus around ¥106.15 in late afternoon action in New York.