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 approved the tax legislation in an afternoon vote. The Senate was expected to vote on the tax bill this evening. Republicans were confident of the bill being signed into law by the end of the week.
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 5 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 lowering corporate tax rates to 21 percent from 35 percent, which investors are betting will boost profits as well as trigger share buybacks and higher dividend payouts.
The S&P 500 technology sector fell 0.5 percent, with tech stocks weighing the most on the major indexes. The Dow Jones Industrial Average fell 37.45 points, or 0.15 percent, to 24,754.75, the S&P 500 lost 8.69 points, or 0.32 percent, to 2,681.47 and the Nasdaq Composite dropped 30.91 points, or 0.44 percent, 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 1.1 percent after broker Instinet downgraded the stock to "neutral," saying the supply-demand balance for the iPhone X suggested little space to raise sales estimates for the next quarter.
The consumer staples index's 0.2-percent rise led gainers. Altria rose 1.7 percent after Berenberg upgraded the stock saying a lower tax rate would boost the tobacco company's profit and shareholder payouts.
Wal-Mart rose 0.9 percent after Citigroup upgraded the stock to "buy" on expectations that the retailer's shares will rise further in 2018. Zimmer Biomet jumped 6.1 percent, the S&P's biggest gainer, after the company appointed a full-time chief executive.
Declining issues outnumbered advancing ones on the NYSE by a 1.81-to-1 ratio; on Nasdaq, a 1.82-to-1 ratio favoured decliners. Volume on US exchanges was 6.5 billion shares, below the 6.8 billion average for the full session over the last 20 trading days.