US stocks retreat from records as House passes tax cut

US stocks retreat from records as House passes tax cut

NYSE Dec19
Traders work on the floor of the New York Stock Exchange. (Spencer Platt/Getty Images/AFP)

NEW YORK: Wall Street stocks retreated from records on Tuesday (Dec 19), as investors paused their enthusiasm after the US House of Representatives approved the long-awaited Republican tax cut bill.

The market "is taking a bit of a breather," said Sam Stovall, chief investment strategist at CFRA Research. "It has done so well based of the likelihood of the passage of the tax reform."

The Dow Jones Industrial Average dropped 37.45 points (0.15 per cent) to 24,754.75.

The broad-based S&P 500 shed 8.69 points (0.32 per cent) to close at 2,681.47, while the tech-rich Nasdaq Composite Index fell 30.91 points (0.44 per cent) to 6,963.85.

All three indices closed at records in the prior two sessions.

The House, the lower chamber of the US Congress, approved the controversial US$1.5-trillion package of tax cuts for businesses and individuals by a vote of 227-203, with all Democrats voting "no."

The most comprehensive revamp of the nation's tax code in three decades now heads to the Senate for a decisive vote expected to take place on Tuesday night, after which it will be sent to President Donald Trump for his signature.

Technology shares were among the weaker sectors, with Apple losing 1.1 per cent, Netflix 1.8 per cent and Tesla Motors 2.3 per cent.  

Given the equity gains already seen in recent weeks, some analysts predicted the market could pull back after the bill actually passed. But others are eyeing S&P 500 targets of around 2,800 in anticipation of higher corporate profits once the tax reform  takes effect.

Stovall said there was a chance the bill's passage could result in a "buy the rumour, sell the news" movement in equities, in part in recognition that some of the changes may have less impact than headlines suggest.

For example, many corporations already pay far below the official 35 per cent tax rate, meaning the drop to 21 per cent will not boost earnings significantly, as Republicans have indicated.

Source: AFP/de