By The Washington Post · Hamza Shaban, Hannah Denham · BUSINESS
Financial stocks tumbled after an investigation by BuzzFeed News and the International Consortium of Investigative Journalists reported over the weekend that major Western banks knowingly facilitated suspicious transactions tied to terrorism and illicit drugs.
Dow Jones industrial average fell more than 509 points, or 1.8%, to close at 27,147.70. At one point, the blue chip index was down 912 points. The S&P 500 index gave up more than 38 points, or 1.2%, to 3,281.06. The broad-based index had been off more than 2.7% at the session's low.
Meanwhile the tech-heavy Nasdaq composite shed more than 14 points, or 0.1%, to close at 10,778.80.
Wall Street has recorded three consecutive weeks of losses, in line with the market's traditional September lull but also as the coronavirus recession dovetails with a presidential election. The market retreat this month was largely fueled by a sell-off in technology stocks and mixed messaging from drugmakers and the Trump administration about the timeline for a coronavirus vaccine and other treatments.
Optimism dimmed on word that a vaccine was not likely to be available to most of Americans until mid-2021, said Kristina Hooper, chief global market strategist at Invesco. But investors also are wary of the contentious political environment domestically, as well as an uptick in coronavirus cases abroad.
"Given that election season has gone into high gear and covid-19 infections are rising in a number of countries around the world, we should all be fastening our seat belts as volatility is likely to increase from here," she said.
Michael Farr, president of Farr, Miller & Washington, said a covid resurgence in Europe has the United Kingdom considering another shutdown, triggering a sell-off in airline, cruise line, and hotel stocks - which all lose when business and recreational travel is stymied.
And the political battle over the next Supreme Court justice "kills the chances of passing an additional stimulus bill prior to the November election," he said.
The tech giants that had stoked Wall Street's astonishing comeback in the spring and early summer continued to slide, with Facebook sheding 1.7%. And Apple, Alphabet, Amazon, Microsoft and Netflix have tumbled since their all-time highs in early September. (Amazon chief executive Jeff Bezos owns The Washington Post.) Farr also noted deep declines in the financial sector: "Any of these presents a strong head wind to share prices but taken together, they are inflicting more broad damage."
The banking giants were rocked by news coverage, based on more than 2,100 documents known as suspicious activity reports or SARs. Banks are legally required to file them when they see transactions that have the traits of financial misconduct or money laundering, such as large transactions in round numbers, or payments between two companies that have no observable business relationship.
BuzzFeed shared these reports with the ICIJ and more than 100 news organizations across 88 countries. The news outlets mapped more than $2 trillion in transactions from 1999 to 2017. Though the major banks that file SARs could have halted nearly any of the flagged financial activity, BuzzFeed reported, they allowed the transactions to go through and continued to collect their fees.
The documents, according to the news organizations, "expose the hollowness of banking safeguards, and the ease with which criminals have exploited them. Profits from deadly drug wars, fortunes embezzled from developing countries, and hard-earned savings stolen in a Ponzi scheme were all allowed to flow into and out of these financial institutions, despite warnings from the banks' own employees."
The Treasury Department, in its response, did not directly address detailed questions posed by the investigation, BuzzFeed reported. Instead, the agency said it was "aware that various media outlets intend to publish a series of articles based on unlawfully disclosed Suspicious Activity Reports (SARs)." The agency went on to say that "the unauthorized disclosure of SARs is a crime," and that it was referring the matter to the Department of Justice and its own Inspector General's office.
Investors also are tracking the escalation in tensions between the U.S. and China, said Nicole Tanenbaum of Chequers Financial Management.
In recent weeks, the Chinese government unveiled new global data security standards intended to counter a rival U.S. initiative; the American ambassador to China quit his post in Beijing; and President Trump vowed publicly "to end our reliance on China once and for all."
Over the weekend, a federal court granted a preliminary injunction halting the Trump administration's planned ban of the Chinese app WeChat, a popular tool for Chinese speakers in the U.S. to communicate with friends and relatives in China, where most Western messaging apps, including Facebook Messenger and WhatsApp, are banned.
The remarkable decline on Wall Street follows a dramatic rise of almost uninterrupted gains, culminating in multiple shattered records of individual stocks and closely watched indexes. Less than three weeks ago, the S&P 500 recorded its highest level ever, at 3,580. But it has since shed nearly 8.4%. The benchmark index is down about 6.3% for the month.
Every sector in the S&P fell Monday, and nearly every company in the Dow lost ground. Oil prices slipped 5% and even safe haven assets like gold were beaten down. The steep losses echoed the market turbulence so common in the early days of the pandemic.
One of the hardest hit stocks Monday stemmed from a unique set of challenges. Shares of the electric truck start-up Nikola dropped sharply after its executive chairman and founder Trevor Milton resigned from the company, following accusations from a short seller that Nikola "is an intricate fraud built on dozens of lies." Nikola has denied the accusations. The stock skidded 19.3%.