President Donald Trump’s decision late on Friday to sign an executive order banning travel from seven predominantly Muslim countries to the United States for 90-days is causing a minor selloff as investors take gains after a post-election rally in stocks and the U.S. dollar. Trump’s order caused over a hundred travelers to the U.S. to either be returned home or held for questioning and it drew a sharp response from protesters at airports around the country, in addition to heads of state and some of America’s most powerful corporate chieftains.
German Chancellor Angela Merkel said her government “regrets the U.S. entry ban against refugees and citizens from several countries,” while Canadian prime minister Justin Trudeau vowed to accept refugees from conflict in the Middle East that are turned down by the U.S. The ban drew a harsh rebuke from Muslim nations like Iraq, where a parliamentary measure sought to restrict U.S. access to the country. In Corporate America, the heads of blue chip companies including Google, Microsoft, Starbucks, Nike and Goldman Sachs all criticized the order.
Starbucks billionaire CEO Howard Schutz told employees, “we will neither stand by, nor stand silent, as the uncertainty around the new administration’s actions grows with each passing day” and vowed to hire thousands of refugees. “We’re concerned about the impact of this order and any proposals that could impose restrictions on Googlers and their families, or that create barriers to bringing great talent to the U.S.,” said Google in a statement. “This is not a policy we support, and I would note that it has already been challenged in federal court, and some of the order has been enjoined at least temporarily,” Goldman Sachs CEO Lloyd Blankfein said in a Monday voicemail with employees.
Venture capitalists including Chris Sacca and Fred Wilson used the ban to raise money for the American Civil Liberties Union, while Google co-founder Sergey Brin and Y-Combinator founder Sam Altman attended protests at San Francisco International Airport. Airbnb offered to house travelers affected by the ban; ride-sharing apps Uber and Lyft offered financial support to drivers impacted by the ban.
The uncertainty created by the order, just over a week into Trump’s term, caused investors to dump stocks and the dollar. The S&P 500 Index fell less than 1% in early trading, while the Dow Jones Industrial Average briefly fell below 20,000 in early trading. The dollar fell versus the Mexican peso, Japanese yen and Swiss franc.
This minor selloff comes after nearly three months of gains as investors position for Trump’s policies of tax cuts, deregulation and increased infrastructure spending. The Trump administration is filled with business people and well known investors, who many on Wall Street believe can implement policies that will fuel growth. The President has also hosted scores of business leaders to his offices and created a policy forum chaired by Blackstone’s Stephen Schwarzman and including JPMorgan CEO Jamie Dimon and General Motors CEO Mary Barra.
A fraying of support between the business community and the Trump administration would undercut investor expectations of a quick execution of tax reform and infrastructure investment. On Monday morning, Trump sought to shift the focus back on his economic agenda, signing an executive order intended to aid small businesses by loosening regulations. The order mandates that two regulations will need to be cut, for every new regulation enacted in Washington.
Elsewhere in corporate news, Fitbit plunged as much as 14% on a report from Re/Code that the wearable gadget maker saw weaker-than-expected holiday sales and planned to lay off as much as 10% of its workforce. Mattress maker Tempur-Sealy International fell as much as 28% to $46.33 after it disclosed weak fourth quarter guidance and a cancellation of its relationship with Mattress Firm, a retailer recently acquired by South African conglomerate Steinhoff International.
Monday was a light day in corporate merger announcements.
Pharmacy giant Walgreens told investors it would reduce the price of its acquisition of Rite-Aid to between $6.50 and $7 a share, or a a about $2 billion price cut. Walgreens will divest more overlapping stores than previously expected and seek extended merger closing deadlines amid continued antitrust review from U.S. regulators. That disclosure sent Rite-Aid shares plunging 16%, but caused Walgreens to rise less than 1% in early trading. Network communications firms Keysight Technologies and Ixia are merging in a $1.6 billion deal. The acquisition comes at a 45% premium to Ixia’s closing price on Dec. 1. In India, reports indicate Vodaphone may be close to acquiring regional wireless carrier Idea Cellular.
In other corporate news, Delta Airlines shares fell as much as 3.5% after it cancelled hundreds of flights in the U.S. on Sunday due to a systems automation issue, which was resolved by early Monday morning. Last summer, the airline suffered a global halt when its flight systems crashed. Global carriers including United Continental, American Airlines and JetBlue also fell sharply in early trading.
Meanwhile, Citigroup said it will exit the mortgage servicing business by 2018. The bank will sell rights to service 780,000 loans made by third parties and backed by Fannie Mae and Freddie Mac to New Residential. It will also transfer servicing rights to Cenlar FSB. Citigroup and New Residential shares both fell slightly on the announcement.
The Commerce Department said consumer spending rose 0.5% in December, meeting economic forecasts, and amounting to the biggest spending gain in three months. Spending accounts for 70% of the U.S. economy. Wages rose 0.3% in December, the Commerce Department reported, a smaller than expected gain according to economists polled by Bloomberg. Wages and salaries rose 0.4% and inflation increased 0.1%, or a 1.7% increase versus this time a year ago. The report indicated the U.S. economy continues to grow, but only at a moderate pace.