Wall St eases as House approves tax legislation overhaul

By April Joyner

NEW YORK (Reuters) - Wall Street stocks drifted lower on Tuesday as the U.S. House of Representatives approved a long-awaited bill to overhaul the tax system.

Stocks added slightly to losses following the vote, which followed weeks of market gains on optimism that tax cuts would boost U.S. earnings and the economy.

"We've had a run-up in preparation as people were expecting a tax cut," said Brian Peery, portfolio manager at Hennessy Funds in Novato, California. "Today, the market is off a little bit, maybe because the bill is not as popular as the GOP hopes it would be in the public opinion."

 

The Senate was expected to vote on the tax bill this evening. Republicans were confident of the bill being signed into law by the end of the week.

The bill, among other things, proposes lowering corporate tax rates to 21 percent from 35 percent, which investors are betting will boost profits as well as trigger share buybacks and higher dividend payouts.

Earlier in the day, stocks were lower as Treasury yields rose on strong housing data. Domestic home construction hit a 13-month high in November.

The Dow Jones Industrial Average <.DJI> fell 29.11 points, or 0.12 percent, to 24,763.09, the S&P 500 <.SPX> lost 7.72 points, or 0.29 percent, to 2,682.44 and the Nasdaq Composite <.IXIC> dropped 37.79 points, or 0.54 percent, to 6,956.97.

On Monday, the Nasdaq briefly topped the 7,000-point mark for the first time on rising hopes for the tax bill to be passed.

Apple fell 1.1 percent after broker Instinet downgraded the stock to "neutral," saying the supply-demand balance for the iPhone X suggested little space to raise sales estimates for the next quarter.

The S&P 500 technology sector <.SPLRCT> fell 0.6 percent, with tech stocks weighing the most on the major indexes.

The gainers were led by the consumer staple index's <.SPLRCS> 0.3 percent rise.

Altria rose 1.9 percent after Berenberg upgraded the stock saying a lower tax rate would boost the tobacco company's profit and shareholder payouts.

Wal-Mart rose 1.8 percent after Citigroup upgraded the stock to "buy" on expectations that the retailer's shares will rise further in 2018.

Zimmer Biomet jumped 6.1 percent, the S&P's biggest gainer, after the company appointed a full-time chief executive.

Declining issues outnumbered advancing ones on the NYSE by a 1.81-to-1 ratio; on Nasdaq, a 1.48-to-1 ratio favoured decliners.

(Additional reporting by Sruthi Shankar in Bengaluru; Editing by Savio D'Souza and James Dalgleish)