Wall Street extends loss after report of gradual tax cuts

FILE PHOTO -  Morning commuters are seen outside the New York Stock Exchange
FILE PHOTO – Morning commuters are seen outside the New York Stock Exchange, July 30, 2012. REUTERS/Brendan McDermid/File Photo

October 30, 2017

By Sruthi Shankar

(Reuters) – U.S. stocks extended losses in early afternoon trading on Monday after a report that the House of Representatives was discussing “a gradual phase-in” for President Donald Trump’s corporate tax cut plans.

The schedule would have the rate reach 20 percent in 2022, the Bloomberg report said. Under the plan, the rate may be reduced from its current 35 percent rate by three percentage points a year starting in 2018.

The details, which the agency said were still being discussed by Republican lawmakers, were reported previously by Reuters on Oct. 12, but investors have become more sensitive to any hints of a climbdown on tax cuts in the past two weeks.

Stocks dipped almost a third of a percent in the hour after the Bloomberg report.

“That headline just caused bit more weakness,” said Randy Frederick, vice president of trading and derivatives for Charles Schwab in Austin, Texas. “The optimism about tax reforms and how favorable it might be was very high.”

Investors appeared to shrug off charges against Paul Manafort, a former campaign manager of President Donald Trump, and one of his affiliates – the first in connection with a probe into possible Russian meddling in the 2016 U.S. presidential election.

Earlier in the session, the Nasdaq Composite hit a record high after Apple <AAPL.O> shares jumped on research notes pointing to strong demand for the iPhone X.

The healthcare sector was under pressure after Merck <MRK.N> dipped 6.13 percent, setting up the drugmaker for its biggest two-day decline on record, after the company said it had withdrawn an application for European use of its key cancer immunotherapy.

With the third-quarter earnings season more than half-way through, nearly 74 percent of the S&P 500 companies to report so far have topped profit expectations, compared with 72 percent overall the past four quarters.

Investors also awaited details of who will be nominated as the next Federal Reserve chief, expected on Thursday.

Trump is likely to pick Federal Reserve Governor Jerome Powell as the next chair of the U.S. central bank, replacing Janet Yellen, a source familiar with the matter said on Monday.

At 12:23 p.m. ET (1623 GMT), the Dow Jones Industrial Average <.DJI> was down 90.63 points, or 0.39 percent, at 23,343.56, the S&P 500 <.SPX> was down 11.71 points, or 0.45 percent, at 2,569.36 and the Nasdaq Composite <.IXIC> was down 21.10 points, or 0.31 percent, at 6,680.17.

Seven of the 11 major S&P indexes were lower, led by losses in healthcare <.SPXHC>, financials <.SPSY> and consumer staples <.SPLRCS> stocks.

Mondelez <MDLZ.O> fell 2 percent ahead of its earnings report, expected after the bell.

General Motors <GM.N> dipped 3 percent after Goldman Sachs downgraded the company’s stock to “sell” from “neutral”.

Advanced Micro Devices <AMD.O> slumped 8.15 percent after Morgan Stanley downgraded the stock to “underweight” from “equalweight”.

Declining issues outnumbered advancers on the NYSE by 1,707 to 1,146. On the Nasdaq, 1,942 issues fell and 872 advanced.

(Reporting by Sruthi Shankar; Editing by Saumyadeb Chakrabarty)

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