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Stocks were set for a muted open on Wednesday even after House Speaker Nancy Pelosi said she will launch a formal impeachment inquiry on President Donald Trump.
Dow Jones Industrial Average futures were up 14 points after the 6 p.m. open, implying a gain of 44 points at the open. S&P 500 and Nasdaq 100 futures indicated a virtually flat open.
On Tuesday, the S&P 500 and Nasdaq Composite posted their biggest one-day drops in a month in anticipation of the impeachment inquiry. The Dow Jones Industrial Average also dropped 142 points, or 0.5%.
“I think we kind of baked in the front end of the announcement during the course of the afternoon, but we’ve got a lot more to learn,” said Art Hogan, chief market strategist at National Securities. “This is going to be news that spills out over time but I can’t imaging the start of this process improves the tone of the U.S.-China trade talks.”
Both countries have been engaged in trade negotiations since last year. The back and forth between China and the U.S. has sent ripples through global financial markets as investors assess the trade war’s impact on the global economy.
“If I’m China, I feel empowered,” Hogan said.
“The president must be held accountable. No one is above the law,” Pelosi said. “He will have to whether to break the law or honor his responsibility to the constitution.”
Pelosi’s announcement follows a call in which Trump allegedly pressured Ukrainian President Volodymyr Zelensky to investigate former Vice President Joe Biden’s family. Trump has admitted to bringing up Biden on the call — tweeting he will release a transcript of it — but denies pressuring Zelensky.
“It came at an unfortunate point when everyone was positioned long hoping the trade war was going to be OK,” said Ilya Feygin, senior strategist at WallachBeth Capital. However, Feygin thinks the market should rebound since impeachment is unlikely to pass the Republican-led Senate.
The call is believed to be part of an intelligence community whistleblower complaint Democrats have asked the administration to release. They say the complaint would hold details not available in the call’s transcript.
Trump reacted to Pelosi’s comments, tweeting: “They never even saw the transcript of the call. A total Witch Hunt!”
Stocks have surged since Trump was elected as the administration has implemented policies such as tax cuts and decreased regulation. The Dow has surged more than 46% since Trump’s election. Stocks have previously struggled when a president faces the possibility of impeachment.
The S&P 500 was down about 20% at one point from its high in 1998 as independent counsel Kenneth Starr ramped up his investigation of President Bill Clinton for perjury and obstruction of justice, according to CFRA. The market bottomed as the House began impeachment proceedings and later recovered all losses to reach a then record high.
Washington policy analyst Chris Krueger said in a note that his “base case” scenario is “the House impeaches Trump, though the Senate does not convict, e.g. Bill Clinton 2.0.”
—CNBC’s Patti Domm contributed to this report.