Tech, small-cap stocks pull back from recent highs
NEW YORK (AP) U.S. stocks declined Tuesday as big technology companies and smaller firms gave up some of their recent gains. Stocks hit record highs over the previous two days as the Republican-backed tax bill made its way through Congress.
Smaller companies in particular have surged because investors feel they will be major beneficiaries of lower corporate tax rates. High-dividend stocks dropped as bond yields rose.
Investors like the proposed tax cut because it would boost corporate profits and likely raise stock prices along with it. The bill would initially cut taxes for most Americans but by 2027 would increase tax bills for most.
Invesco Global Market Strategist Kristina Hooper said two factors are sending bond yields higher: investors are selling bonds to buy stocks as the tax bill appears likely to pass, and they also feel the bill may contribute to inflation.
"There's this expectation that we'll see companies save money on taxes, to put it simply, and spend more in other areas," she said. Investors think "it's going to have an impact on employment, wages, and therefore inflation," she said.
After the close of trading, House Republican leaders said they will have to hold another vote on the bill Wednesday because a few provisions violate Senate rules.
The Standard & Poor's 500 index lost 8.69 points, or 0.3 percent, to 2,681.47. The Dow Jones industrial average shed 37.45 points, or 0.2 percent, to 24,754.75. The Nasdaq composite gave up 30.91 points, or 0.4 percent, to 6,963.85. The Russell 2000 index of smaller-company stocks fell 12.17 points, or 0.8 percent, to 1,536.75. It climbed almost 3 percent over the previous two days.
Apple fell $1.88, or 1.1 percent, to $174.54 after it closed at a new high on Monday. Visa lost $1.41, or 1.2 percent, to $112.14.
Investors also traded on corporate news. Offshore drilling platform maker McDermott International said it will acquire engineering, procurement and construction services company Chicago Bridge & Iron. The companies valued the deal at $6 billion. McDermott fell 90 cents, or 11.9 percent, to $6.69 and CB&I lost $1.91, or 10.7 percent, to $16.01.
The hype surrounding digital currencies showed no signs of slowing. Shares in the financial technology company Longfin have skyrocketed since it bought Ziddu.com, which created a virtual currency for micro-lending. Longfin went public last Wednesday at $5 a share and announced the Ziddu deal Friday. The stock slipped $4.11, or 5.7 percent, to $68.27, giving Longfin a market value of $5.7 billion.
Even CEO Venkat Meenavalli attributed the sudden spike to "euphoric mania" in an interview with CNBC late Monday.