U.S. Stocks Wobble Ahead of Tax-Bill Vote
December 19 2017 - 10:42AM
Dow Jones News
By David Hodari
-- Dow industrials, S&P edge lower
-- Tech companies in S&P 500 fall 0.5%
-- Investors await crucial tax votes
Declining shares of technology companies caused stocks to wobble
Tuesday morning ahead of House Republicans' vote on a sweeping
rewrite of the U.S. tax code.
The Dow Jones Industrial Average fell 15 points, or less than
0.1%, to 24776 soon after the opening bell, while the S&P 500
also declined less than 0.1%. The Nasdaq Composite dropped
0.3%.
Shares of technology companies in the S&P 500 fell 0.5%,
making the sector the broad index's biggest laggard.
While analysts say the tax bill is expected to boost profits
among companies that pay relatively high effective tax rates, such
as retailers, banks and other firms, tech companies aren't expected
to benefit as much, analysts say, since they tend to pay a lower
tax bill than other industries.
Tech companies in the S&P 500 pay an effective tax rate of
about 18%, according to data from FactSet.
Facebook fell 1.2%, while Nvidia declined 1%. PayPal Holdings
shed 1.3%.
That offset gains among shares of consumer staples. Wal-Mart
Stores gained 1%, while Hershey Co. added 1.2%.
Those moves, as well as pockets of optimism among some European
and Asia-Pacific investors on Tuesday, came in conjunction with the
growing probability that Republican leaders will succeed in
overhauling the U.S. tax code and slashing the corporate tax rate
before the new year.
House Republicans are expected to pass the bill by a comfortable
margin, with the Senate expected to vote later Tuesday or
Wednesday.
"There'll be some movement the more likely it becomes. The
S&P's done well and that tells you it's not been priced in yet.
The tax cuts could add 7% to large cap earnings, double that to
small cap earnings... and tax reform should extend this earnings
cycle," said Ben Laidler, global equities strategist at HSBC.
European stocks' early momentum ran out of steam after most
Asia-Pacific indexes closed higher Tuesday. The Stoxx Europe 600
was down 0.1% in recent trading.
In Asia, the Shanghai Composite rose 0.9%, while Hong Kong's
Hang Seng Index returned to positive territory for December, rising
0.7%. Japan's Nikkei fell 0.1%, with Sony 0.9% lower and Nintendo
falling 0.8%.
Michael Wursthorn contributed to this article.
Write to David Hodari at David.Hodari@dowjones.com
(END) Dow Jones Newswires
December 19, 2017 10:27 ET (15:27 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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