U.S. stocks declined Tuesday as big technology companies and smaller firms gave up some of their recent gains. Stocks hit record highs the previous two days as the Republican-backed tax bill made progress.
Smaller companies in particular have surged because investors feel they will be major beneficiaries of lower corporate tax rates. High-dividend stocks dropped as bond yields rose.
Investors like the proposed tax cut because it would boost corporate profits and probably lift stock prices. The bill initially would cut taxes for most Americans, but by 2027, it would increase tax bills for most.
While stocks weren't doing much Tuesday, bond prices fell. The yield on the 10-year Treasury note rose to its highest price in more than a month, to 2.45% from 2.39%.
Invesco Global Market Strategist Kristina Hooper said two factors are sending bond yields higher: Investors are selling bonds to buy stocks as the tax bill appears likely to pass, and they also feel the bill may contribute to inflation.
“There's this expectation that we'll see companies save money on taxes, to put it simply, and spend more in other areas,” she said. Investors think “it's going to have an impact on employment, wages, and therefore, inflation,” she said.
The Standard & Poor's 500 index fell 8.69 points, or 0.3%, to 2,681.47. The Dow Jones industrial average fell 37.45 points, or 0.2%, to 24,754.75. The Nasdaq composite fell 30.91 points, or 0.4%, to 6,963.85. The Russell 2000 index of smaller-company stocks fell 12.17 points, or 0.8%, to 1,536.75; it climbed almost 3% the previous two days.
Apple fell 1.1% to $174.54; on Monday, it had closed at a new high. Visa fell 1.2% to $112.14.
Investors also traded on corporate news. Offshore drilling platform maker McDermott International slid 11.9% to $6.69 after it said it will acquire engineering, procurement and construction services company Chicago Bridge & Iron in a $6-billion deal. CB&I declined 10.7% to $16.01.
Medical device maker Zimmer Biomet climbed 6.1% to $121.38 after it named Bryan Hanson to be its new chief executive. Hanson most recently led at Medtronic's minimally invasive therapies business. Former CEO David Dvorak left the company in July.
Hospital operator Tenet Healthcare rose 2% to $15.03 after saying it will cut an additional $100 million in costs and will look to sell its Conifer business, which provides revenue management services. The company also said it will continue shaking up its board.
Nursing and rehabilitation center company Kindred Healthcare said it will be bought by health insurer Humana and two private equity firms for $9 a share. That values Kindred at $782 million, and the company said the deal is worth $4.1 billion, including debt.
Rumors of a sale have boosted Kindred's stock 23% this month, including a gain of 10.5% on Monday. On Tuesday, it retreated 4.2% to $9.10.
The hype surrounding digital currencies showed no signs of slowing. Shares of the financial technology company Longfin have skyrocketed since it bought Ziddu.com, which created a virtual currency for microlending. Longfin went public last Wednesday at $5 a share and announced the Ziddu deal Friday. The stock slipped 5.7% to $68.27, giving Longfin a market value of $5.7 billion.
Even CEO Venkat Meenavalli attributed the sudden increase to “euphoric mania” in an interview with CNBC late Monday.
Energy companies edged up along with the price of oil. Benchmark U.S. crude rose 30 cents to $57.46 a barrel in New York. Brent crude, used to price international oils, rose 39 cents to $63.80 a barrel in London.
Wholesale gasoline ticked up 2 cents to $1.70 a gallon. Heating oil rose 1 cent to $1.94 a gallon. Natural gas sank 5 cents to $2.69 per 1,000 cubic feet.
Gold slipped $1.30 to $1,264.20 an ounce. Silver fell 5 cents to $16.15 an ounce. Copper rose 1 cent to $3.15 a pound.
The dollar rose to 112.94 yen from 112.56 yen. The euro rose to $1.1845 from $1.1784.