S&P, Dow Flat as Banks Stocks Weigh; Nasdaq Edges Higher

(Reuters) —
Traders work on the floor of the New York Stock Exchange on Wednesday. (Reuters/Brendan McDermid)

The S&P and the Dow were flat in early afternoon trading on Wednesday as doubts over a Republican tax plan and the broader outlook for U.S. growth hurt bank shares, while the Nasdaq was slightly higher.

Investors were nervous about the potential outcome of the plan to cut corporate taxes, which was unveiled last week and is seen as crucial to stronger economic growth.

As well as slashing the corporate rate to 20 percent from 35 percent, the bill would eliminate many tax breaks and is expected to face opposition from interest groups.

U.S. House Speaker Paul Ryan told Fox News Radio the House Tax Bill has immediate corporate rate cut, but phasing in rate reduction would still be good for businesses.

“Investors realize that the House tax plan is a preliminary one and don’t really expect it to pass. We haven’t even seen what the Senate version of the bill looks like,” said Brad McMillan, chief investment officer at Commonwealth Financial.

“I think the market has already processed a lot of good news including strong earnings, and now some of the worries are taking over.”

Republicans are yet to score a major legislative win since Trump took office in January, even though the party controls both chambers of Congress as well as the White House.

The S&P has risen about 21 percent since the election of President Donald Trump a year ago, partly on the back of his promises to cut taxes and other business-friendly measures.

U.S. Treasury yields edged higher, but the yield curve remained close to its flattest level in a decade, potentially cutting into the profits of banks.

Analysts said a flattening yield curve at a time when the Federal Reserve is hiking rates is a sign that investors are wary about the sustainability of economic growth and inflation in the world’s biggest economy.

At 12:44 p.m. ET, the Dow Jones Industrial Average was down 2.66 points, or 0.01 percent, at 23,554.57; and the S&P 500 was up 0.48 points, or 0.01 percent, at 2,591.12.

The Nasdaq Composite was up 5.53 points, or 0.08 percent, at 6,773.31.

Five of the 11 major S&P sectors were higher, with defensive sectors such as real estate and consumer staples leading the gainers.

The tech sector was boosted by a 1.7 percent rise in Qualcomm.

Snapchat operator Snap fell 16.6 percent in trading after China’s Tencent took a 12 percent stake. The stock had fallen nearly 20 percent in premarket trading, a day after Snap reported much-slower-than expected advertising revenue and user growth.

Take-Two Interactive Software rose 11.2 percent after the videogame maker gave a stronger-than-expected revenue forecast for the holiday quarter.

Declining issues outnumbered advancers on the NYSE by 1,508 to 1,315. On the Nasdaq, 1,688 issues fell and 1,188 advanced.

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