Wall Street to open lower on worries over delay in coporate tax cuts

By Tanya Agrawal

REUTERS - Wall Street looked set for a weaker opening on Friday on fears that a delay in corporate tax cuts until 2019 may stall the market rally that is partly hinged on President Donald Trump's election promise to boost corporate profits and create jobs.

Senate Republicans have unveiled a tax-cut plan that would delay lowering corporate rate to 20 percent by a year and provide small-business owners with a deduction rather than a special business rate.

The Senate Republicans version of the bill differs markedly on corporate, business and individual tax cuts from legislation detailed by their counterparts in the House of Representatives.

 

The S&P 500 index has surged more than 20 percent since the 2016 presidential election, fueled by Trump's promises.

All three major indexes were on track to end lower for the week, with the S&P and the Dow on track to post weekly losses after eight straight weeks of gains.

The S&P 500 is trading at 18 times expected earnings, expensive compared with its 10-year average of 14.3, according to Thomson Reuters Datastream. Cutting corporate taxes would boost earnings and make stocks relatively less expensive.

"The futures are pointing to a bumpy ride as the delay in corporate tax cuts proposed by the GOP tax plan weighs," said Peter Cardillo, chief market economist at First Standard Financial.

"If the Senate version is elected, a market correction will follow and as the battle for tax reform intensify, stocks are likely to feel the pinch of a wobbly market."

Dow e-minis were down 35 points, or 0.15 percent, with 35,882 contracts changing hands at 8:28 a.m. ET (1228 GMT).

S&P 500 e-minis were down 7.5 points, or 0.29 percent, with 251,869 contracts traded.

Nasdaq 100 e-minis were down 16 points, or 0.25 percent, on volume of 44,107 contracts.

With third-quarter earnings winding down and stocks still trading at record levels, investors are also looking to book profits.

Earnings for the quarter are expected to have climbed 8 percent, compared with expectations of a 5.9 percent rise at the start of October, according to Thomson Reuters I/B/E/S.

Shares of Nvidia were up 4.8 percent after the chipmaker's revenue forecast for the current quarter topped estimates.

Walt Disney was up 2 percent as the promise of a new film trilogy overshadowed weak quarterly results and struggles at the media company.

Hertz Global Holdings jumped 12.4 percent as the car rental company reported a better-than-expected net profit.

Nordstrom fell 1.9 percent after its quarterly same-store sales came in below expectations, while J.C. Penney was up 14.9 percent after the department store chain reported third-quarter same-store sales that were twice what it had estimated.

(Reporting by Tanya Agrawal; Editing by Arun Koyyur)