Markets finished in the red on Friday after market watchers speculated about the likely outcome of a delay in tax reforms, proposed last Thursday by the Senate Finance Committee. Meanwhile, in a speech at the Pacific Rim summit, Trump commented that he would not indulge in any multilateral trade that would be unfair to the United States. Benchmarks posted weekly losses following the likelihood of a delay in tax-reforms.
The Dow Jones Industrial Average (DJIA) decreased 0.2%, to close at 23,422.21. The S&P 500 Index (INX) fell 0.1% to close at 2,582.28. The tech-laden Nasdaq Composite Index (IXIC) closed at 6,750.94, losing less than 0.1%. Decliners outnumbered advancers on the NYSE by a 1.36-to-1 ratio. On Nasdaq, a 1.19-to-1 ratio favored advancing issues. The CBOE VIX increased 7.5% to close at 11.29.
How Did the Benchmarks Fare?
The Dow declined 39.73 points to end in the red. Such a performance by the blue-chip index put an end to an eight-week winning streak. Shares of Intel (INTC - Free Report) and Merck (MRK - Free Report) declined 1.6% and 1.3% and weighed heavily on the Dow. However, shares of Disney (DIS - Free Report) advanced 2.1% and pared some of the losses for the blue-chip index.
The S&P 500 lost 2.32 points to also finish in negative territory. This ensured that the S&P 500 also ended an eight-week winning run. Of the 11 major segments of the S&P 500, six ended in the red, with healthcare and energy sectors leading the decliners. The Health Care Select Sector SPDR ETF (XLV) and Energy Select Sector SPDR ETF (XLE) declined 0.7% and 0.5%, respectively. Shares of Johnson Controls International plc (JCI - Free Report) plummeted 4.1% and was the biggest drag on the S&P 500.
Meanwhile, the Nasdaq could manage meager gains, rising only a fraction of a point to finish in positive territory. Such nominal gains were fuelled by a recovery in semiconductor stocks.
Tax Woes Weigh on Broader Markets
On Thursday, a version of the tax plan was released by the Senate Finance Committee. The Senate version differed from that of the House panel's in several ways. Unlike the House Republicans’ tax proposals which focus on reducing corporate tax rate from 35% to 20%, the Senate version supports a similar tax cut only by 2019. Also, per House Republicans, the top individual tax rate would be 39.6%, whereas the Senate version puts the ceiling rate at 38.5%. Worries over a possible delay in tax cut plans weighed on investor sentiment.
The two versions of the tax Bill will be scrutinized and debated upon before reaching on a conclusion. Such a confused state of affairs dampened investor sentiment. Moreover, market watchers speculated that no formal decision was likely on the tax Bill before Thanksgiving, with some even speculating the likelihood of such a decision occurring only beyond Christmas. Such fears weighed heavily on the broader markets.
Trump Says No to Future Multilateral Deals
In a speech on Friday during the Pacific Rim summit, Vietnam, President Trump made a heated speech in a bid to defend economic nationalism. He said that the United States would not enter into any multilateral trade in order to protect its commercial rights. While speaking to business leaders at 21-country Asia-Pacific Economic Cooperation forum, Trump commented that the global trading system and World Trade Organization had been unfair to the United States. He also added that he would not “let the United States be taken advantage of anymore.”
Trump made it very clear that he would only engage in trade with those Indo-Pacific countries which ‘abide’ by norms ensuring fair and reciprocal trade. He also mentioned that United States would no longer get into agreements which “will tie our hands, surrender our sovereignty and make meaningful enforcement practically impossible.” Such comments by Trump placed the U.S. trade delegation directly against the other members attending the economic forum.
On the economic data front, the index of consumer sentiment for the month of November came in at 97.8, down from 100.7 in October. The reading came in below the consensus estimate of 100.4.
For the week, the Dow, the S&P 500 and the Nasdaq declined 0.5%, 0.5% and 0.2%, respectively. While, the S&P 500 and the Dow snapped their eight-week winning streak, the Nasdaq posted weekly losses for the first time in six weeks. Meanwhile, the Russell 2000 index (RUT) posted a weekly decline of 1.2% — its biggest weekly loss since August. Such losses were incurred after the likely delay of tax reforms till 2019.
The Senate Finance Committee released a tax plan which aims to reduce corporate tax rate to 20% but not before 2019, in contrast to the 2018 deadline proposed by the House Republicans. Although, investors turned jittery following concerns that tax cuts may be delayed, markets curtailed some of the day’s declines after the House Ways and Committee passed a bill to reframe the tax reforms.
Meanwhile, Apple’s (AAPL - Free Report) market value jumped over $900 billion for the first time ever. Finally, benchmarks touched new highs last Monday following news of a possible merger between Broadcom and Qualcomm, marking the 26th trading day when an all-time high was achieved by all the three key U.S. indexes in 2017. This is the highest number of record highs achieved in a single year.
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