Stocks sink slightly after tax bill passage
Stock indexes closed slightly lower on Wednesday for the second straight day despite the passage of the GOP tax bill intended to boost U.S. businesses.
The Dow Jones Industrial Index fell 0.11 percent, while the Nasdaq and Standard and Poor’s 500 finished 0.8 percent and 0.4 percent below open, respectively.
Stocks have soared during President Trump’s first year as investors expected Republicans to slash tax rates for corporations. Congress passed the sweeping GOP tax-overhaul bill on Wednesday.{mosads}
Trump has frequently boasted about the stock market’s performance on Twitter, and said Tuesday that investors haven’t fully digested the benefits of the Republican tax plan.
“Stocks and the economy have a long way to go after the Tax Cut Bill is totally understood and appreciated in scope and size,” Trump said in a Tuesday tweet.
“Immediate expensing will have a big impact. Biggest Tax Cuts and Reform EVER passed. Enjoy, and create many beautiful JOBS!”
The bill cuts the corporate tax rate from 35 percent to 21 percent, and includes several tax credits meant to encourage businesses to expand and hire. Republicans have long insisted that the legislation would help U.S. corporations compete against international competitors and keep more jobs in the country.
Stock analysts and traders have insisted that part of the market boom under Trump is largely attributable to the GOP efforts to cut taxes and reduce regulations. Traders have been optimistic about a tax bill since Trump’s election and stocks have steadily increased as the bill cleared key hurdles.
The final passage of the tax bill might seem like a green light for investors to pour more into stocks. But some Wall Street veterans say that traders are now looking to see how the bill will impact the economy and future economic policy.
Dan Alpert, managing partner at investment firm Westwood Capital, said the dip was a classic case of “buy the rumor, sell the news,” in which traders buy stocks that would perform well upon a rumored event, and then sell after the event happens.
Selling on the news of the tax bill would give investors time to assess the bill’s impact and take new investment positions according to how they believe the aftermath will play out.
Other factors unrelated to the tax bill could also weigh on the stock market. Apple stock fell 1.1 percent on Tuesday after a rare downgrade, according to CNBC.
Congress also faces a Dec. 22 deadline to fund the government or risk a shutdown.