Investors look past US tax revamp
US stocks fell on Tuesday as excitement over the likelihood of a tax code revamp was offset by concern over its effect on years of monetary policy stimulus and the future of interest rates.
NEW YORK — US stocks fell on Tuesday as excitement over the likelihood of a tax code revamp was offset by concern over its effect on years of monetary policy stimulus and the future of interest rates.
The US House of Representatives initially passed the tax legislation in an afternoon vote, but the bill included provisions that did not comply with Senate rules. The Senate was expected to vote Tuesday evening on a revised version of the bill, with the offending provisions removed. If the Senate approves the bill, as is expected, the House will vote again on Wednesday.
Stocks added to losses after the vote, which followed weeks of market gains on optimism that tax cuts would boost US earnings and the economy. Some investors also said that much of those benefits were already reflected in stock prices.
The S& P 500 has climbed about five percent since mid-November when the House passed its tax overhaul bill.
“The tax rate we’ve certainly priced in (in stocks),” said Jack Ablin, chief investment officer at BMO Private Bank in Chicago.
Investors may also be “celebrating the tax package but recognizing that what central banks have given us in the last years they could begin to take away.” The bill, among other things, proposes cutting corporate tax rates to 21% from 35%, which investors are betting will boost profits as well as trigger share buybacks and higher dividend payouts.
The S&P 500 technology sector fell 0.50%, with tech stocks weighing the most on the major indices.
The Dow Jones Industrial Average fell 37.45 points, or 0.15%, to 24,754.75, the S&P 500 lost 8.69 points, or 0.32%, to 2,681.47 and the Nasdaq Composite dropped 30.91 points, or 0.44%, to 6,963.85.
Earlier in the day, stocks were pushed lower as Treasury yields rose on strong housing data. Domestic home construction hit a 13-month high in November.
Apple fell 1.10% after broker Instinet downgraded the stock to “neutral,” saying the supplydemand balance for the iPhone X suggested little space to raise sales estimates for next quarter.
The consumer staples index’s 0.20% rise led gainers.
Altria rose 1.70% after Berenberg upgraded the stock saying a lower tax rate would boost the tobacco company’s profit and shareholder payouts.
Wal- Mart rose 0.90% after Citigroup upgraded the stock to “buy” on expectations that the retailer’s shares will rise further in 2018.
Zimmer Biomet jumped 6.10%, the S&P’s biggest gainer, after the company appointed a full-time chief executive.
Declining issues outnumbered advancing ones on the NYSE by 1.81 to one; on Nasdaq, a 1.82-toone ratio favored decliners.
Volume on US exchanges was 6.60 billion shares, below the 6.80 billion average for the full session over the last 20 trading days. —