Wall Street pares early gains to close lower amid tax plan uncertainty
- Falling US T-bond yields dragged financials lower.
- Healthcare sector closes higher on upbeat profit results.
- Uncertainty surrounding the tax reform's legalization weighs on the market sentiment.
After inching higher to new intraday highs during the first trading hour of the NA session, major equity indexes in the U.S. lost traction to close the day with modest losses.
Sharp drops witnessed in major banks' such as Goldman Sachs, JPMorgan, and Bank of America, shares pulled down the S&P Financials Sector (SPSY), forcing it to become the worst performing sector of the day with a 1.33% drop. "The U.S. 2-to-10-year Treasury yield curve hit its flattest in a decade, potentially cutting into the profits of banks, which borrow money at short-term interest rates in order to lend it out at longer terms," Reuters explained. On the other hand, a retracement seen in crude oil prices weighed on the S&P Energy Sector (SPNY), which ended the day 0.2% lower.
In the meantime, the tax plan, which is likely to encounter a tough obstacle in the Senate even if it passes through the Republican-controlled House smoothly, creates skepticism among investors as it's expected to increase the federal and fiscal debt significantly.
On a positive note, the S&P 500 Health Care Sector (SPXHC) added 0.3% on Tuesday as a couple of big pharmaceutical companies reported higher-than-expected profits.
The Dow Jones Industrial Average closed the day with small gains at 23,557.23, the S&P 500 dropped 0.78 points, or 0.03 percent, to 2,590.57 and the Nasdaq Composite lost 20.03 points, or 0.3%, to 6,767.78.
DJIA technical outlook
Valeria Bednarik, Chief Analyst at FXStreet, writes, "the Dow reached an all-time intraday high before turning lower at 23,624, with the daily decline looking little relevant in terms of candles on the daily chart, as the index held above Monday's low, while still develops far above sharply bullish moving averages. In the same chart, however, the Momentum indicator extended further lower, now nearing its mid-line and drawing a bearish divergence, as the RSI indicator turned flat around 77. Despite the divergence, these readings are not enough to confirm a bearish extension for this Wednesday. Shorter term, and according to the 4 hours chart, the downward potential is also limited, as technical indicators managed to bounce from their mid-lines, while the index settled a few points above its 20 SMA after briefly dipping below it."
Headlines from the NA session
- Forex today: dollar bounces back as high betas unwind
- US: Consumer credit increased at a rate of 5.5% during third quarter
- Fed to raise rates in December and two more times in 2018 - Wells Fargo
- Fed's Quarles: There is 'quite an openness' within Fed to take fresh look at financial regulations
- EIA: 2018 U.S. Crude oil production to rise by 720,000 bpd (vs 680,000 bpd gain previously)
- Commodities outperformed most sectors on Monday - UOB
- US: Job openings remained elevated in September - Wells Fargo
- OPEC’s Barkindo: Talks ongoing among all countries on oil cut pact’s duration beyond March 2018
- OPEC's World Oil Outlook: Demand set to increase by 2 mb/d from first to the second half of 2017
- US: Number of job openings was little changed at 6.1 mln in September
- US: Economic Optimism Index rises across every category in November - IBD/TIPP
Author
Eren Sengezer
FXStreet
As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.
