Stocks falter as tax bill proceeds
NEW YORK — After big gains over the past two days, U.S. stocks fell yesterday after the news broke that the House approved the GOPbacked tax bill, which would lower corporate tax rates.
Big technology companies gave up some recent gains, as did smaller companies, which have surged because investors feel they will be major beneficiaries of the reduced corporate tax rate. High-dividend stocks dropped as bond yields rose. U.S. indexes had jumped to record highs over the past two days as Republicans appeared to shore up enough support to make sure the bill passes. Due to a procedural issue, the House must revote on the bill today.
Investors like that because it would boost corporate profits and likely raise stock prices along with it. The bill would initially cut taxes for most Americans, but by 2027 would increase tax bills for most.
The yield on the 10-year Treasury note rose to its highest price in more than a month, to 2.45 percent from 2.39 percent late Monday.
Invesco Global Market Strategist Kristina Hooper said two factors are sending bond yields higher: Investors are selling bonds to buy stocks as the tax bill appears likely to pass, and they also feel the bill may contribute to inflation. “There’s this expectation that we’ll see companies save money on taxes, to put it simply, and spend more in other areas,” she said. Investors think “it’s going to have an impact on employment, wages, and therefore inflation,” she said.
The Standard & Poor’s 500 index lost 8.69 points (0.3 percent), to 2,681.47. The Dow Jones industrial average shed 37.45 points (0.2 percent), to 24,754.75. The Nasdaq gave up 30.91 points (0.4 percent), to 6,963.85. The Russell 2000 index of smaller-company stocks fell 12.17 points (0.8 percent), to 1,536.75.