December 3, 2017 / 11:49 PM / 2 years ago

Stocks fade after record run as U.S. tax bill digested

NEW YORK (Reuters) - Wall Street faded having notched record highs on Monday, while the dollar and Treasury yields climbed, after a major U.S. tax overhaul cleared an important hurdle.

U.S. Dollar banknotes are seen in a box at the Money Service Austria company's headquarters in Vienna, Austria, November 16, 2017. REUTERS/Leonhard Foeger

Markets digested the U.S. Senate’s approval on Saturday of the biggest tax law change since the 1980s, taking President Donald Trump closer to his goal of slashing taxes on businesses.

On Wall Street, the benchmark S&P 500 .SPX set a record intraday high, but then pulled back and finished lower, while the Dow industrials still managed a record high close. MSCI's gauge of stocks across the globe .MIWD00000PUS gained 0.14 percent and also hit an all-time peak, but was well off its session high.

The Republicans’ tax plan is expected to add $1.4 trillion over 10 years to the $20 trillion national debt to finance changes that they say would further boost an already growing economy.

The Dow Jones Industrial Average .DJI rose 58.46 points, or 0.24 percent, to 24,290.05, the S&P 500 .SPX lost 2.78 points, or 0.11 percent, to 2,639.44 and the Nasdaq Composite .IXIC dropped 72.22 points, or 1.05 percent, to 6,775.37.

Some of the biggest gainers were from areas expected to benefit from a lower corporate tax rate. The S&P 500 banks index .SPXBK surged 2.3 percent, while the Dow Jones Transport Average .DJT jumped 1.8 percent.

But the technology sector .SPLRCT, which has led Wall Street’s record-setting rally this year, tumbled 1.9 percent.

“You’re seeing what amounts to a pretty significant rotation going on in the market. The biggest evidence of that is tech,” Chuck Carlson, chief executive officer at Horizon Investment Services in Hammond, Indiana.

“People are taking some profits off the table in those sectors and areas that have been very strong this year,” Carlson said.

Aetna AET.N shares fell 1.4 percent after drugstore chain operator CVS Health (CVS.N) agreed to buy the health insurer for $69 billion. CVS shares fell 4.6 percent.

In Europe, the pan-European FTSEurofirst 300 index .FTEU3 rose 0.97 percent.

Gains in the dollar helped Germany's dollar-exposed DAX .GDAXI leap from a two-month low, up 1.5 percent.

The dollar rose against a basket of currencies after the tax package moved forward.

The dollar index .DXY rose 0.26 percent, with the euro EUR= down 0.26 percent to $1.1858. The Japanese yen weakened 0.23 percent versus the greenback at 112.38 per dollar.

“Dollar bulls are pinning their hopes on the sweeping tax deal leading to a more rapid pace of interest rate hikes from the Federal Reserve,” said Jake Spark, U.S. corporate hedging manager at Western Union Business Solutions, in Washington.

Benchmark 10-year notes US10YT=RR last fell 3/32 in price to yield 2.3723 percent, from 2.363 percent late on Friday.

Gains in the dollar and Treasury yields were capped by political concerns in Washington, as investors remained worried about an investigation into Russian attempts to influence the 2016 U.S. election of Trump, analysts said.

A woman walks in strong wind caused by Typhoon Lan, past an electronic board showing the graphs of the recent movements of Japan's Nikkei average outside a brokerage in Tokyo, Japan, October 23, 2017. REUTERS/Issei Kato

Oil fell on profit-taking as the market eyed signs of rising U.S. production, though prices remained close to recent two-year highs thanks to last week’s decision by OPEC and other producers to extend output cuts.

Brent crude futures LCOc1 settled down $1.28, or 2 percent, at $62.45 a barrel. U.S. West Texas Intermediate futures CLc1 were down 89 cents, or 1.5 percent, at $57.47.

Spot gold XAU= dropped 0.3 percent to $1,276.70 an ounce.

Additional reporting by Gertrude Chavez-Dreyfuss in New York, Sruthi Shankar and Rama Venkat Raman in Bengaluru, Sujata Rao in London; Editing by Dan Grebler and Andrew Hay

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