Stocks barely budge as Congress passes tax overhaul
U.S. stocks bounced around Wednesday and finished little changed after Congress passed the Republican-sponsored tax bill.
Smaller companies fared the best. Bond yields rose, which hurt companies that pay big dividends, including utilities and makers of household goods.
Stocks have jumped over the last four weeks as the tax legislation moved closer to passing, but they haven’t done much in the last two days as Congress voted on the bill. Stocks set all-time highs Monday and slipped Tuesday.
It has been a very strong year for the market, and ordinarily investors might sell some of their holdings in late December and take some profits before they make new investments in January. But with a tax bill passing at the very end of the year, TD Ameritrade Chief Market Strategist JJ Kinahan said, that pattern might not hold.
“This could be a year where you see the selling pressure at the beginning of the year because people are delaying their selling, waiting for a better tax environment,” he said. “There are always unintended consequences with tax plans.”
The Standard & Poor’s 500 index slipped 2.22 points, or 0.1%, to 2,679.25. The Dow Jones industrial average edged down 28.10 points, or 0.1%, to 24,726.65. The Nasdaq composite fell 2.89 points, or less than 0.1%, to 6,960.96. The Russell 2000 index of smaller-company stocks rose 3.33 points, or 0.2%, to 1,540.08.
Investors have sent stocks higher in recent weeks as the tax bill’s prospects improved. The bill would cut the corporate tax rate to 21% from 35%, which could increase corporate profits. Other provisions are intended to encourage companies to invest more money in their businesses.
In a note this week, after the bill was largely complete, Barclays analyst Maneesh Deshpande said the bill will reduce the effective tax rate for S&P 500 companies to 20.7% from 26% because of changes taxation for profits made overseas. He said household goods companies, banks and industrial companies will get the largest tax cuts, while technology and healthcare companies won’t see as much of a difference.
FedEx shares climbed 3.5%, to $251.07 after the delivery company said its holiday season is off to a strong start and raised its annual profit forecast. It also said the tax bill could boost its profit this year by $4.40 to $4.50 a share because of changes in its deferred tax liabilities as well as a reduced tax rate.
AT&T said it will pay a $1,000 bonus to 200,000 of its U.S. employees as the bill passed. The company said last month that it would invest $1 billion domestically if the measure was adopted. On Wednesday, its stock rose 1.3% to $38.55.
Bond prices fell further. The yield on the 10-year Treasury note rose to a nine-month high of 2.49% from 2.46%. When yields rise, it’s good for banks because they can charge higher interest rates on mortgages and other kinds of loans.
Energy companies climbed with oil prices. Benchmark U.S. crude rose 53 cents to $58.09 a barrel in New York. Brent crude, used to price international oils, climbed 76 cents, or 1.2%, to $64.56 a barrel in London.
Wholesale gasoline rose 4 cents to $1.74 a gallon. Heating oil stayed at $1.94 a gallon. Natural gas fell 6 cents to $2.64 per 1,000 cubic feet.
Stitch Fix dived 9.8% to $22.34 after the clothing styling service reported its results for the first time since it went public in November. Stitch Fix did about as well as investors expected, but it said its profit margins decreased because of its newer men’s and plus-size clothes. Shipping costs increased, and it had fewer products available in distribution centers.
Philip Morris International fell 2.5% to $104.37 after Reuters reported that some of the employees who have worked on clinical studies of the company’s iQOS device, which heats tobacco without burning it, have questions about the quality of that research. The company has spent years working on iQOS and asked the Food and Drug Administration to approve it at the end of 2016 based in part on those trials.
Gold rose $5.40 to $1,269.60 an ounce. Silver rose 12 cents to $16.28 an ounce. Copper rose 4 cents to $3.20 a pound.
Bitcoin futures turned sharply lower. On the Chicago Mercantile Exchange, the price dropped $1,425, or 7.8%, to $16,775.
The dollar rose to 113.42 yen from 112.94 yen. The euro rose to $1.1879 from $1.1845.
Germany’s DAX dropped 1.1%. The French CAC 40 slid 0.6%. In Britain, the FTSE 100 fell 0.3%. Japan’s Nikkei 225 edged up 0.1%. The South Korean Kospi lost 0.3%. The Hang Seng in Hong Kong slipped 0.1%.
UPDATES:
1:50 p.m.: This article was updated with closing prices, context and analyst comment.
This article was originally published at 7:50 a.m.
