Wall Street fades after touching record highs as trade digests US tax bill

PUBLISHED : Tuesday, 05 December, 2017, 7:51am
UPDATED : Tuesday, 05 December, 2017, 7:55am

Wall Street faded having notched record highs on Monday, while the dollar and Treasury yields climbed, after a major US tax overhaul cleared an important hurdle.

Markets digested the US Senate’s approval on Saturday of the biggest tax law change since the 1980s, taking President Donald Trump closer to his goal of slashing taxes on businesses.

On Wall Street, the benchmark S&P 500 set a record intraday high, but then pulled back and finished lower, while the Dow industrials still managed a record high close. MSCI’s gauge of stocks across the globe gained 0.14 per cent and also hit an all-time peak, but was well off its session high.

The Republicans’ tax plan is expected to add US$1.4 trillion over 10 years to the US$20 trillion national debt to finance changes that they say would further boost an already growing economy.

US Senate passes tax overhaul in major win for President Trump and big business

The Dow Jones Industrial Average rose 58.46 points, or 0.24 per cent, to 24,290.05, the S&P 500 lost 2.78 points, or 0.11 per cent, to 2,639.44 and the Nasdaq Composite dropped 72.22 points, or 1.05 per cent, to 6,775.37.

Some of the biggest gainers were from areas expected to benefit from a lower corporate tax rate. The S&P 500 banks index surged 2.3 per cent, while the Dow Jones Transport Average jumped 1.8 per cent.

But the technology sector, which has led Wall Street’s record-setting rally this year, tumbled 1.9 per cent.

“You’re seeing what amounts to a pretty significant rotation going on in the market. The biggest evidence of that is tech,” Chuck Carlson, chief executive officer at Horizon Investment Services in Hammond, Indiana.

“People are taking some profits off the table in those sectors and areas that have been very strong this year,” Carlson said.

In Europe, the pan-European FTSEurofirst 300 index rose 0.97 per cent.

Gains in the dollar helped Germany’s dollar-exposed DAX leap from a two-month low by going up 1.5 per cent.

The dollar rose against a basket of currencies after the tax package moved forward.

The dollar index rose 0.26 per cent, with the euro down 0.26 per cent to US$1.1858. The Japanese yen weakened 0.23 per cent to 112.38 per dollar.

“Dollar bulls are pinning their hopes on the sweeping tax deal leading to a more rapid pace of interest rate hikes from the Federal Reserve,” said Jake Spark, US corporate hedging manager at Western Union Business Solutions, in Washington.

Benchmark 10-year notes last fell 3/32 in price to yield 2.3723 per cent, from 2.363 per cent late on Friday.

Gains in the dollar and Treasury yields were capped by political concerns in Washington, as investors remained worried about an investigation into Russian attempts to influence the 2016 US election of Trump, analysts said.

Oil fell on profit-taking as the market eyed signs of rising US production, though prices remained close to recent two-year highs thanks to last week’s decision by Opec and other producers to extend output cuts. Brent crude futures settled down US$1.28, or 2 per cent, at US$62.45 a barrel. US West Texas Intermediate futures were down 89 cents, or 1.5 per cent, at US$57.47.

Spot gold dropped 0.3 per cent to US$1,276.70 an ounce.