U.S. stocks fell on Tuesday, retreating from records hit earlier in the session as questions continued to swirl over the timing of the Republican Party’s tax bill, as well as what form it could eventually take in order to have a higher likelihood of passage soon.
What are the main benchmarks doing?
The Dow Jones Industrial Average
fell 36 points, or 0.2%, to 23,512. The S&P 500 index
lost 5 points to 2,586, a decline of 0.2%. The Nasdaq Composite Index
was off 29 points, or 0.4%, to 6,757. All three indexes inched up to records in early trading, but have pared that early advance.
The Russell 2000
index fell 1.3%. The index of small-capitalization shares is seen as more sensitive to the prospects of tax reform than the other indexes, which are geared toward larger and multinational companies.
Financial stocks were by far the biggest decliners of the day, with the sector down 1.5%. The decline was driven by weakness in regional banks; the SPDR S&P Regional Banking ETF
fell 2.2%. Among the day’s biggest decliners, Zions Bancorp
fell 3% while Regions Financial
was off 2.4%.
Larger financial institutions were not immune to the weakness; Wells Fargo & Co.
declined 2% while J.P. Morgan Chase & Co.
was off 1.9%. Citigroup Inc.
All three benchmarks closed at records on Monday, marking the 26th time this year that they’ve notched records simultaneously, which is itself a record. The three gauges are up between 16% and 26% for the year as of Monday’s close, boosted by factors such as an expanding U.S. economy, growing corporate profits and bets that the Trump administration will deliver tax cuts and other business-friendly measures. Because markets have priced in movement on taxes, stocks could be vulnerable in the event a bill has trouble passing, analysts said.
Congressional Republican unveiled a long-awaited plan last week, though it was unclear when the policy could be enacted, what form it might take, or even whether it was likely to pass at all.
What are strategists saying?
“If you look at the bill that was introduced, it had some problems in areas like child credits or what it would do to the deficit, and the more congressmen and senators get an earful from their constituents, the harder it will be to vote yes,” said James Meyer, chief investment officer at Tower Bridge Advisors. “Republicans feel they have to pass something, anything, but I think all they’ll be able to do is a modest cut in corporate taxes with very little on the individual tax front.”
Sandy Villere, a portfolio manager who oversees about $2 billion in assets at St. Denis J. Villere & Company, noted that questions about tax policy were coming at a time when “the market is getting stretched on valuations,” though he added that “if the tax cuts come through, the market will look a lot cheaper than it is.”
“As long as tax talk is on the table, the market should continue grinding higher. You have a nice jobs picture, low interest rates, and earnings have been really good.”
What could help drive markets?
President Donald Trump, on a trip throughout Asia, warned North Korea that he was prepared to use the full range of U.S. military power to stop any attack. But in a more conciliatory appeal, he urged Pyongyang to “make a deal” to end the nuclear standoff, a Reuters report said.
On the Fed front, Yellen is due to give a speech at 3 p.m. Eastern Time in Washington, D.C., as the departing chairwoman accepts an award for ethics in government.
What data are in focus?
The number of job openings in the U.S. rose slightly in September to 6.09 million, keeping them near a record high.
Separately, consumer borrowing surged in September by the largest amount in almost a year after slowing in the prior month.
Check out: MarketWatch’s Economic Calendar
Which stocks are in focus?
Shares in Priceline Group Inc.
and TripAdvisor Inc.
fell 12% and 20%, respectively, after each online travel company sounded downbeat about fourth-quarter revenue while posting earnings late Monday. The companies also seem to be planning an increase in advertising spending.
fell 2.6% after the craft-oriented e-commerce company late Monday reported its quarterly results.
Valeant Pharmaceuticals International Inc.
jumped 16% after it reported better-than-expected quarterly result, though it lowered its guidance for the rest of 2017.
Dean Foods Co.
reported revenue of $1.94 billion, compared with Wall Street estimates for revenue of $1.96 billion and profit of 20 cents a share, versus 21 cents expected, representing weaker-than-expected profit and revenue for the foods company. However, shares rose 1.2%.
SeaWorld Entertainment Inc.
reported third-quarter earnings on Tuesday that were below Wall Street expectations. Net income for the quarter was $55.03 million, or 64 cents per share, down from $65.66 million, or 77 cents per share during the same quarter a year ago. The stock rose 6.3%.
slumped 9.6% after the footwear seller beat revenue expectations but provided a downbeat outlook. For the quarter to Sept. 30, the net loss was $2.3 million, or 3 cents a share, compared with a loss of $5.4 million, or 7 cents a share, in the same period a year ago.
What are other assets doing?
Europe’s main stock gauges
ended lower. Asian markets mostly finished higher, with Japan’s Nikkei
benchmark jumping 1.7% to reach its highest close since 1992, as one analyst noted “few risks on the horizon.”
Haven plays such as gold futures
and the Japanese yen
lost ground. The ICE U.S. Dollar Index
traded higher, while West Texas Intermediate crude
were little changed after surging in the previous session.