Wall Street drops; Pelosi says to start formal impeachment inquiry

NEW YORK (Reuters) - U.S. stocks fell in volatile trade on Tuesday, giving the S&P 500 its biggest daily drop in a month as a push for the impeachment of U.S. President Donald Trump gained momentum among Democrats in the U.S. Congress.

After the bell, Democratic House Speaker Nancy Pelosi, as expected, said the House of Representatives will launch a formal inquiry into whether Trump should be impeached, saying actions taken by the Republican president had seriously violated the U.S. Constitution.

The inquiry will examine whether Trump sought Ukraine’s help to smear former Vice President Joe Biden, the front-runner for the 2020 Democratic presidential nomination. Support among Democrats for the start of impeachment proceedings increased after news related to the charge.

Further pressuring Wall Street during Tuesday’s session, disappointing consumer confidence data underscored concerns over the economic impact of a prolonged U.S.-China trade war.

Stocks briefly pared losses in late-afternoon trading after Trump, in a tweet, said his administration would release a complete transcript of a call with Ukrainian President Volodymyr Zelenskiy that is at the center of the controversy.

He said the released transcript would show the call was “totally appropriate,” that he had not pressured Zelenskiy to investigate Biden, and that there had been no quid pro quo of U.S. aid in exchange for a probe.

“What all of that combined is going to do is ensure there is going to be elevated (market) volatility in both directions in the next few days,” said Michael James, managing director of equity trading at Wedbush Securities in Los Angeles.

The Cboe volatility index .VIX ended the session near a three-week high. The S&P 500 retail index .SPXRT fell 1.4%, while AMZN.O declined 2.4% and was the biggest drag on the S&P 500 and Nasdaq.

The Dow Jones Industrial Average .DJI fell 142.22 points, or 0.53%, to 26,807.77, the S&P 500 .SPX lost 25.18 points, or 0.84%, to 2,966.6 and the Nasdaq Composite .IXIC dropped 118.84 points, or 1.46%, to 7,993.63.

Wall Street’s major indexes lost their footing early, when Trump took a harsh tone about China’s trade practices.

Paul Nolte, portfolio manager at Kingsview Asset Management in Chicago, said the trade war was likely a bigger issue than possible impeachment proceedings for the market right now.

“I don’t know how strong the case is for impeachment, so I don’t know what will happen with that. We react first and think later,” he said.

Nike Inc NKE.N slipped ahead of the world's largest sportswear maker's first-quarter results after the bell. The shares rose about 5% following its results, which beat analysts' expectations.

Declining issues outnumbered advancing ones on the NYSE by a 2.20-to-1 ratio; on Nasdaq, a 3.43-to-1 ratio favored decliners.

The S&P 500 posted 31 new 52-week highs and two new lows; the Nasdaq Composite recorded 36 new highs and 96 new lows.

Volume on U.S. exchanges was 7.68 billion shares, compared to the 7.2 billion average for the full session over the last 20 trading days.

Additional reporting by Ambar Warrick, Arjun Panchadar and Medha Singh in Bengaluru; Editing by David Gregorio and Tom Brown