Stocks Waver as Investors Parse Tax Plan, Earnings Reports

By Michael Wursthorn Features Dow Jones Newswires

Stocks wobbled and bonds strengthened as investors assessed House Republicans' proposal for the biggest tax code overhaul in decades.

Continue Reading Below

The Dow Jones Industrial Average fell more than 80 points after a detailed summary of the tax plan was reported, but the blue-chip index recovered later in the day to move higher. Declines in shares of home builders and other consumer-discretionary stocks kept pressure on the S&P 500.

The tax 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.

Components for individual taxpayers, such as limits on the home mortgage-interest deduction and caps on property tax deductions, contributed to 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."

Continue Reading Below

The S&P 500 was little changed in recent trading, while the Nasdaq Composite shed less than 0.1%. The Dow industrials rose 76 points, or 0.3%, to 23511.

Shares of consumer-discretionary stocks in the S&P 500 slid roughly 0.8%.

Home builder Lennar fell 3.4%, while PulteGroup shed 1.6%. Home-improvement companies were dragged down too, with Home Depot shares falling 1.8% and Lowe's declining 3.9%.

Meanwhile, financial stocks in the S&P 500 rose 0.6%, with some analysts saying the proposal to cut the corporate tax rate to 20% from 35% would be a boon for banks.

U.S. government bonds gained following the tax plan's release. The yield on the 10-year Treasury note fell to 2.347%, according to Tradeweb, from 2.378% on Wednesday. Bond yields fall as prices rise.

Investors and analysts cautioned to not read too deeply into Thursday's market moves since the tax plan could change as Republicans work to push it through the House and the Senate in the coming weeks. And if the plan falters, similar to Congressional Republicans' earlier attempts at overhauling the Affordable Care Act, analysts expect a muted reaction.

"If taxes don't get done, it won't have a meaningful impact on markets," said Krishna Memani, chief investment officer of OppenheimerFunds. "Markets have rallied this year because of global growth and earnings."

Other moves followed mixed earnings announcements.

Shares of Newell Brands, the maker of Sharpie markers and Rubbermaid containers, slumped 26% after the company cut its earnings guidance for the year following a weak back-to-school season.

Facebook, which remains under scrutiny over alleged Russian propagandists' activity during the election, was down 2% after reporting a jump in profit.

Shares of Blue Apron sunk 19% after the meal-kit company posted a loss and shed customers in the third quarter.

Apple is due to release results after the market closes Thursday and was up 0.7% in recent trading.

The British pound slid 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 1.4% against the dollar at $1.3057. The Stoxx Europe 600 fell 0.5%.

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.

--Christopher Whittall contributed to this article.

Write to Michael Wursthorn at Michael.Wursthorn@wsj.com

(END) Dow Jones Newswires

November 02, 2017 16:10 ET (20:10 GMT)