U.S. equities fell on Thursday, pulling back from record highs, on worries that a corporate tax cut could be delayed.
proposed plan by Senate Republicans would push slashing the corporate
tax rate from 35 percent to 20 percent until 2019. The move contrasts
with a bill working its way through the House. The proposed Senate
measure would also alter the individual tax system.
for tax reform have increased recently, helping lift the stock market to
all-time highs. The major indexes briefly fell more than 1 percent on
Thursday, but managed to close well off their session lows.
Dow Jones industrial average finished 101.42 points lower at 23,461.94,
with McDonald's as the biggest decliner; it fell 1.8 percent. The Dow
briefly fell more than 250 points.
The S&P 500 pulled back 0.4 percent to 2,584.62, with industrials as the leading decliner; the sector fell 1.3 percent.
The Nasdaq composite lagged, falling 0.6 percent to 6,750.05.
Russell 2000, which tracks small-cap stocks, fell nearly 0.5 percent.
Companies in the Russell 2000 have more to gain from an immediate
domestic tax cut since they are more likely to be U.S.-based and not
sprawling global entities.
"We expect short-term momentum to
deteriorate temporarily, triggered by technology stocks as they
(finally) react to overbought extremes." said Katie Stockton, chief
technical strategist at BTIG, in a note. "A buying opportunity is likely
to present itself in 2-3 weeks based on former setups of this nature."
is by far the best-performing sector in the S&P 500 this year. The
sector is up 37 percent in 2017, boosted by strong earnings from
companies in the space.
Stocks posted record closing highs on
Wednesday, adding to their already strong gains for the year. The
S&P 500, Dow and Nasdaq are all up at least 15 percent in 2017.
market is digesting its recent gains," said Mark Luschini, chief
investment strategist at Janney Montgomery Scott. "After a prolonged
rally, everyone gets worried that they will be caught off-guard when the
Also giving investors pause was a decline in risky
high-yield bonds. The iShares iBoxx High Yield Corporate Bond
exchange-traded fund (HYG) fell 0.5 percent Thursday and has pulled back
1.7 percent over the past month. Wall Street looks at high-yield bonds
as a leading indicator for stocks.
"People are wondering if that's
a canary in the coal mine" for stocks, said Janney's Luschini. Stocks
around the world also declined Thursday. The Stoxx 600 — which tracks a
broad swath of European equities — fell 1.1 percent. In Asia, the
Japanese Nikkei 225 finished 0.2 percent lower; it briefly rose more
than 2 percent to hit its highest level since 1991.
Global equities have risen alongside their U.S. counterparts this year as economic conditions around the world have improved.
have been mostly strong this season. According to FactSet, 73 percent
of S&P 500 companies that have reported have surpassed earnings