Tech, small cap stocks pull back from their recent highs

Investors like the proposed tax cut because it would boost corporate profits and likely raise stock prices along with it. (Pexels photo)

NEW YORK— U.S. stocks declined Tuesday as big technology companies and smaller firms gave up some of their recent gains. Stocks hit record highs over the previous two days as the Republican-backed tax bill made its way through Congress.

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 likely raise stock prices along with it. The bill would initially cut taxes for most Americans but by 2027 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 per cent from 2.39 per cent late Monday.

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 tax bill passed through the House, largely along party lines ahead of a Senate vote scheduled for Tuesday night. The $1.5 trillion package would cut the corporate tax rate to 21 per cent from 35 per cent, and would slash taxes for the wealthy, with smaller cuts for middle-and low-income families.

After the close of trading, House Republican leaders said they will have to hold another vote on the bill Wednesday because a few provisions violate Senate rules.

The Standard & Poor’s 500 index lost 8.69 points, or 0.3 per cent, to 2,681.47. The Dow Jones industrial average shed 37.45 points, or 0.2 per cent, to 24,754.75. The Nasdaq composite gave up 30.91 points, or 0.4 per cent, to 6,963.85. The Russell 2000 index of smaller-company stocks fell 12.17 points, or 0.8 per cent, to 1,536.75. It climbed almost 3 per cent over the previous two days.

Apple fell $1.88, or 1.1 per cent, to $174.54 after it closed at a new high on Monday. Visa lost $1.41, or 1.2 per cent, to $112.14.

Investors also traded on corporate news. Offshore drilling platform maker McDermott international said it will acquire engineering, procurement and construction services company Chicago Bridge & Iron. The companies valued the deal at $6 billion. McDermott fell 90 cents, or 11.9 per cent, to $6.69 and CB&I lost $1.91, or 10.7 per cent, to $16.01.

Medical device maker Zimmer Biomet climbed after it named Bryan Hanson to be its new CEO. Hanson most recently led at Medtronic’s minimally invasive therapies business. Former CEO David Dvorak left the company in July. Zimmer gained $6.95, or 6.1 per cent, to $121.38.

Hospital operator Tenet Healthcare said it will cut another $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. Its stock gained 29 cents, or 2 per cent, to $15.03.

Nursing and rehabilitation centre 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.

Rumours of a sale have boosted the stock 23 per cent this month, including a gain of 10.5 per cent Monday. On Tuesday it retreated 40 cents, or 4.2 per cent, to $9.10.

The hype surrounding digital currencies showed no signs of slowing. Shares in the financial technology company Longfin have skyrocketed since it bought Ziddu.com, which created a virtual currency for micro-lending. Longfin went public last Wednesday at $5 a share and announced the Ziddu deal Friday. The stock slipped $4.11, or 5.7 per cent, to $68.27, giving Longfin a market value of $5.7 billion.

Even CEO Venkat Meenavalli attributed the sudden spike to “euphoric mania” in an interview with CNBC late Monday.

Energy companies edged higher along with the price of oil. Benchmark U.S. crude rose 30 cents to $57.46 a barrel in New York while Brent crude, used to price international oils, added 39 cents to $63.80 a barrel in London.

Wholesale gasoline picked up 2 cents to $1.70 a gallon. Heating oil gained 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 added 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.

The DAX in Germany slid 0.7 per cent and the French CAC 40 gave up 0.7 per cent. In Britain, the FTSE 100 rose 0.1 per cent. Tokyo’s Nikkei 225 shed 0.2 per cent and Hong Kong’s Hang Seng rose 0.7 per cent. The Kospi in Seoul declined 0.1 per cent.