U.S. Stocks Wobble Ahead of Tax-Bill Vote
By David Hodari
-- Dow industrials, S&P edge lower
-- Tech companies in S&P 500 fall 0.5%
-- Investors await crucial tax votes
Declining shares of technology companies caused stocks to wobble Tuesday morning ahead of House Republicans' vote on a sweeping rewrite of the U.S. tax code.
The Dow Jones Industrial Average fell 15 points, or less than 0.1%, to 24776 soon after the opening bell, while the S&P 500 also declined less than 0.1%. The Nasdaq Composite dropped 0.3%.
Shares of technology companies in the S&P 500 fell 0.5%, making the sector the broad index's biggest laggard.
While analysts say the tax bill is expected to boost profits among companies that pay relatively high effective tax rates, such as retailers, banks and other firms, tech companies aren't expected to benefit as much, analysts say, since they tend to pay a lower tax bill than other industries.
Tech companies in the S&P 500 pay an effective tax rate of about 18%, according to data from FactSet.
Facebook fell 1.2%, while Nvidia declined 1%. PayPal Holdings shed 1.3%.
That offset gains among shares of consumer staples. Wal-Mart Stores gained 1%, while Hershey Co. added 1.2%.
Those moves, as well as pockets of optimism among some European and Asia-Pacific investors on Tuesday, came in conjunction with the growing probability that Republican leaders will succeed in overhauling the U.S. tax code and slashing the corporate tax rate before the new year.
House Republicans are expected to pass the bill by a comfortable margin, with the Senate expected to vote later Tuesday or Wednesday.
"There'll be some movement the more likely it becomes. The S&P's done well and that tells you it's not been priced in yet. The tax cuts could add 7% to large cap earnings, double that to small cap earnings... and tax reform should extend this earnings cycle," said Ben Laidler, global equities strategist at HSBC.
European stocks' early momentum ran out of steam after most Asia-Pacific indexes closed higher Tuesday. The Stoxx Europe 600 was down 0.1% in recent trading.
In Asia, the Shanghai Composite rose 0.9%, while Hong Kong's Hang Seng Index returned to positive territory for December, rising 0.7%. Japan's Nikkei fell 0.1%, with Sony 0.9% lower and Nintendo falling 0.8%.
Michael Wursthorn contributed to this article.
Write to David Hodari at [email protected]