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Dow bounces back after Trump fears prompt worst selloff of year

Adam Shell
USA TODAY

The Dow Jones industrial average rebounded on Thursday after its worst selloff since September, as investors shifted their focus back to a solid economy and away from chaotic presidential politics.

Still, Wall Street continued to debate whether political turmoil in Washington would make it more difficult for President Trump to move forward on his economic agenda, which calls for a big tax cut for corporations and heavy spending on infrastructure.

Traders and financial professionals work on the floor of the New York Stock Exchange (NYSE) following the opening bell, May 18, 2017. (Photo by Drew Angerer/Getty Images)

At the close on Thursday, the Dow, which fell nearly 373 points the previous day, was up 56.09 points, or 0.3%, at 20,663.02.

Instead of a second big day of selling, which was feared, the stock market flashed signs of stability from the opening bell Thursday. Investors appeared to be in wait-and-see mode as it was unclear whether Trump's woes would have a big adverse effect on the economy and investor confidence.

Investors' anxiety level also diminished, as a closely watched Wall Street "fear gauge" fell more than 6% after jumping more than 40% Wednesday.

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Good news on the corporate earnings front and fresh data that showed the labor market remained strong gave investors a reason to focus on the positives, rather than political chaos, said Kate Warne, investment strategist at Edward Jones.

"There weren't any new revelations to push stocks down further," Warne told USA TODAY. "Investors are buying dips because (business conditions) remain positive."

Investors reacted negatively Wednesday after reports that a memo written by the ex-director of the FBI, James Comey, alleged that Trump asked him to back off a probe of ex-national security adviser Michael Flynn. That headline was followed by news that another former FBI director, Robert Mueller, was appointed to oversee the federal investigation into Russia's alleged meddling in the November presidential election.

Nick Sargen, senior economic adviser at Fort Washington Investment Advisors, said the appointment of a "credible person" like Mueller to lead the probe of the Trump campaign's alleged ties to Russia reassured investors.

Some market pros said Wednesday's selloff might have been overdone. "I thought yesterday's market behavior was a bit severe," said Mark Luschini, chief investment strategist at Janney. "There is no 'smoking gun' as yet that we know of."

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