U.S. stock markets closed lower on Tuesday following concerns on President Trump’s proposed tax-cut bill. Market participants also remained worried about the U.S. fiscal prudence after sovereign credit rating downgrade. All three major stock indexes ended in negative territory.

How Did The Benchmarks Perform?

The Dow Jones Industrial Average (DJI) fell 0.3% or 114.83 points to close at 42,677.24. The blue-chip index terminated a three-day winning run. Notably, 20 components of the 30-stock index ended in negative territory and 10 finished in positive zone. 

The tech-heavy Nasdaq Composite finished at 19,142.71, sliding 0.4% due to weak performance of technology bigwigs. The index ended a two-day winning run. The major loser of the tech-laden index was however Airbnb Inc. (ABNB Quick QuoteABNB - Free Report) . 

The stock price of the leisure and recreation firm was down 3.3%. Airbnb currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The S&P 500 was down 0.4% to finish at 5,940.46 The benchmark terminated a six-day winning streak. Eight out of 10 broad sectors of the broad-market index ended in negative territory and three in positive zone. The Consumer Staples Select Sector SPDR (XLP) rose 0.4%. On the other hand, the Energy Select Sector SPDR (XLE) fell 0.9%. 

The fear-gauge CBOE Volatility Index (VIX) was down 0.3% to 18.09. A total of 16.14 billion shares were traded on Tuesday, lower than the last 20-session average of 17.38 billion. The S&P 500 posted 19 new 52-week highs and no new 52-week lows while the Nasdaq Composite recorded 59 new 52-week highs and 46 new 52-week lows.

Moody’s Downgrade U.S. 

On May 16, after the closing bell, Moody’s Investor Services downgraded the U.S. sovereign credit rating by one notch to Aa1 from Aaa. Moody’s is the third major rating agency after the S&P 500 Global and Fitch to downgrade the U.S. sovereign credit rating. 

Moody’s cited the growing burden of financing the federal government’s outstanding budget deficit of a mammoth $36 trillion and the rising cost of rolling over existing debt under the high-interest rate regime.

According to the rating agency, "Successive US administrations and Congress have failed to agree on measures to reverse the trend of large annual fiscal deficits and growing interest costs.” The rating agency changed its outlook on the United States to "stable" from "negative."

Following the development, the yield on the long-term U.S. 30-Year Treasury Note spiked more than 5% and the yield on the benchmark 10-Year U.S. Treasury Note climbed to 4.5%. The 10-year yield is closely link to the mortgage rate.

Concerns on Trump’s SALT Bill

President Donald Trump failed to influence House republicans from Democrat-controlled states for their approval of a major tax bill. These Republican legislators have disagreed with the Trump administration raising questions on the tax deduction allowed for state and local taxes (SALT) on federal income tax returns. 

Five Republican dissidents said in a statement that “A fair SALT deduction is a matter of fundamental fairness for the hardworking families we represent, including the many who proudly support President Trump and voted for him, in part, because he promised to restore SALT.”

The 2017 Republican tax bill capped SALT deductions at $10,000 and the current tax bill has raised the limit to $30,000. But a section of Republican legislators disapproved it as not high enough.