The Dow dropped 350 points and swung wildly on a report that Michael Flynn is prepared to testify against President Trump.
The sharp slide in the stock market came within minutes of an ABC News report that Flynn is prepared to testify that Trump directed him to make contact with Russians.
CNN has not confirmed the ABC report.
Flynn, Trump’s former national security adviser, pleaded guilty on Friday to charges he lied to the FBI about conversations with Russia’s ambassador, according to court documents.
The Dow was recently down 135 points, while the S&P 500 fell almost 1%. The Nasdaq was down 1.1%. Gold, which often does well during times of fear, climbed nearly 1%. The VIX, a barometer of market volatility, soared 12% to its highest level since late August.
“This is how a market reacts when there is a large unknown. Everyone wants to know: What’s the next shoe to drop?” said Art Hogan, chief market strategist at Wunderlich Securities.
Peter Boockvar, chief market analyst at The Lindsey Group, said it’s “obvious” that the ABC News report was the catalyst for the tumble.
“It’s potentially the biggest political headache he has to deal with,” Boockvar said.
The selloff reflects fears that the Russia scandal will imperil Trump’s economic agenda, especially tax cuts. Indeed, the market trimmed its losses after Senate Majority Leader Mitch McConnell declared that Republicans have enough votes to pass the tax bill.
The GOP tax plan has helped send U.S. stocks soaring in recent weeks. The Dow spiked 332 points on Thursday and closed above the 24,000 level for the first time.
“This drama is clearly going to cause some near-term volatility,” said Ryan Detrick, senior market strategist at LPL Financial. “At the same time, the economy is strong enough that we don’t expect a major disturbance in the stock market.”
