Stocks Decline as Investors Parse Tax Plan, Earnings Reports

By Christopher Whittall and Michael Wursthorn Features Dow Jones Newswires

The S&P 500 slid as investors assessed House Republicans' proposal to conduct the biggest transformation of the tax code in decades.

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The broad index was down 0.3% in recent trading, recovering slightly from deeper losses earlier in the session. The Dow Jones Industrial Average fell 8 points, or less than 0.1%, to 23427, while the Nasdaq Composite was down 0.5%.

While another round of profit reports contributed to some of stocks' biggest swings Thursday, investors' attention also has turned to a Republicans' tax proposal. The plan aims to permanently chop the corporate tax rate, compress the number of individual income tax brackets and eventually repeal the taxes paid by large estates, according to a detailed summary of the plan reviewed by The Wall Street Journal.

Components for individual taxpayers, such as limits on the home mortgage-interest deduction and caps on property tax deductions, contributed to early-morning moves among consumer stocks, specifically home builders, analysts said.

"There's a general disappointment in the individual side of things,"

said Yousef Abbasi, global market strategist at JonesTrading. "The biggest tax cut went to the corporations."

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Shares of consumer-discretionary stocks in the S&P 500 slid roughly 1%, with losses deepening following reports of the tax plan summary.

Home builder D.R. Horton fell 1%, while PulteGroup shed 1.7% and Lennar declined nearly 3%.

Home Depot was among the biggest losers in the Dow industrials, falling more than 2% in recent trading.

"We'll be very focused on the [tax plan] today and we'll be focused on the debate as it continues for much of the balance of the year," said Thomas Wright, director of equities at JMP Securities.

The yield on the 10-year Treasury note fell to 2.349%, according to Tradeweb, from 2.378% on Wednesday. Bond yields fall as prices rise.

Other moves followed mixed earnings announcements.

Shares of Newell Brands, the maker of Sharpie markers and Rubbermaid containers, slumped 27% after the company cut its earnings guidance for the year following a weak back-to-school season.

Kraft Heinz reported its first sales increase since its namesake companies combined two years earlier. However, it missed analysts' expectations. Shares fell about 0.9%.

Facebook, which remains under scrutiny over alleged Russian propagandists' activity during the election, was down 2.8% after reporting a jump in profit.

Apple is due to release results after the market closes Thursday and was down 0.8% in recent trading.

The British pound and U.K. government bond yields fell after the Bank of England's rate-setting committee voted by a margin of seven to two to raise interest rates, but signaled further increases aren't imminent. The pound was recently down 1.2% against the dollar at $1.3086.

The Stoxx Europe 600 was down 0.6%.

Moves in currencies and bond markets were muted after The Wall Street Journal reported that President Donald Trump intends to nominate Federal Reserve governor Jerome Powell as the next chairman of the central bank. Mr. Powell is an ally of Fed Chairwoman Janet Yellen who is widely expected to continue the central bank's gradual approach to tightening monetary policy.

Separately, the Fed kept policy on hold on Wednesday as expected and signaled it remains on course to raise interest raise rates once more this year.

Mr. Powell is "a continuity candidate," said Nick Gartside, international chief investment officer for global fixed income at J.P. Morgan Asset Management.

Like Ms. Yellen, he thinks Mr. Powell will be a "realist" when it comes to raising interest rates and react to economic data.

"The data is strong. That's the impetus for a December rate hike and three next year," said Mr. Gartside.

In the Asia-Pacific region, China's Shanghai Composite Index fell 0.4%, while Australia's S&P/ASX 200 declined 0.1%. Japan was the region's notable outperformer, with a rally in the last hour of trading sending the Nikkei Stock Average up 0.5% to another 21-year high.

Write to Christopher Whittall at christopher.whittall@wsj.com and Michael Wursthorn at Michael.Wursthorn@wsj.com

(END) Dow Jones Newswires

November 02, 2017 12:12 ET (16:12 GMT)