Tech falls; banks and telecoms rise

Stock indexes didn’t do much at first glance Monday, but the modest move for the Standard & Poor’s 500 masked some dramatic changes roiling underneath the surface.

Telecom stocks, banks and other areas of the market that stand to benefit the most from Washington’s drive to cut corporate tax rates jumped. At the same time, technology stocks slumped, giving up a chunk of the gains that have made them the best-performing part of the market this year.

The cross-currents swept through the market on the first day of trading after the Senate narrowly approved its proposal to revamp the tax system. Indexes initially jumped on expectations that lower tax rates would help corporate profits pile up even higher.

Lower tax rates would help boost profits for companies, which already have been reporting resurgent earnings growth this year because of the improving global economy. If profits do accelerate, that would help allay worries that the stock market — which is still close to record highs — has climbed too far, too quickly.

Telecom companies pay some of the highest effective tax rates among the big companies in the S&P 500, so they stand to reap some of the biggest rewards of lower tax rates. Telecom stocks in the index jumped 1.6%, tied for the biggest gain of the 11 sectors in the index.

Financial stocks, which analysts also expect to be winners from the tax overhaul, likewise climbed 1.6%.

Tech firms, meanwhile, already tend to be paying the lowest effective tax rates of the 11 sectors in the S&P 500, analysts said. Tech stocks in the index dropped 1.9% on Monday. It’s a very different position for the sector, which has risen nearly twice as much as the overall S&P 500 this year.

“It’s not that the tax bill is negative for tech companies,” said Ernie Cecilia, chief investment officer at Bryn Mawr Trust. “It’s just less positive for it than for other areas.”

Adding to the uncertainty is the work that remains for the tax overhaul to become law. The Senate and House of Representatives still need to iron out differences in their proposals.

Congress still has a packed schedule, the tax overhaul notwithstanding. Washington faces a Friday deadline to avert a government shutdown. Friday is also the day the government will release its monthly jobs report, one of the last major economic reports before the Federal Reserve’s meeting next week on interest rates. Many economists expect the Fed to approve the third rate increase of the year.

And hanging over everything in Washington is the investigation into Russia’s involvement with last year’s presidential election.

In Europe, stock markets rallied as talks continued for Britain’s exit from the European Union. France’s CAC 40 jumped 1.4%, and Germany’s DAX surged 1.5%. The FTSE 100 in London rose 0.5%.

Asian markets were mixed. South Korea’s Kospi rose 1.1%, the Hang Seng in Hong Kong gained 0.2%, and Japan’s Nikkei 225 index fell 0.5%.

In the bond market, the yield on the 10-year Treasury note held steady at 2.37%.

The dollar rose to 112.60 yen from 112.05 yen. The euro fell to $1.1855 from $1.1893.

Benchmark U.S. crude fell 89 cents to $57.47 a barrel. Brent crude, the international standard, sank $1.28 to $62.45 a barrel. Natural gas fell 8 cents to $2.99 per 1,000 cubic feet. Heating oil fell 5 cents to $1.89 a gallon. Wholesale gasoline fell 5 cents to $1.69 a gallon.

Gold fell $4.60 to $1,277.70 an ounce. Silver fell 2 cents to $16.37. Copper was close to flat at $3.09 a pound.