Stocks close lower on concerns about corporate tax cuts

Stocks ended lower Monday after a report surfaced saying the House is considering a plan that would lower the U.S. corporate tax rate gradually.

Bloomberg reported the plan being discussed by the House would leave the corporate rate at 20 percent by 2022. The gradual plan is “has been considered” but is not final, according to the report.

That report “is absolutely hitting the market,” said Dave Lutz, the head of ETF trading at JonesTrading. “We started reversing as soon as the headline hit.”

The S&P 500 lost 0.32 percent after the report, while the Dow shed 85 points.

Expectations for tax cuts have increased recently after the House passed a budget plan backed by the Senate. The budget’s approval in the House lets the Senate with a simple majority.

GM and Advanced Micro Devices were among the worst performers in the S&P 500. Shares of Advanced Micro Devices fell 6.4 percent after Morgan Stanley analysts warn demand for cryptocurrency mining chips will be cut in half.

“We expect cryptocurrency to gradually fade from here, consoles to decline, and graphics to be flattish,” analyst Joseph Moore said in a note.

General Motors was also among the worst performers in the S&P 500, pulling back more than 3 percent after Goldman Sachs downgraded the stock to sell, noting it sees a 28 percent downside over the next 12 months for the stock.

“Our work on pickup trucks and crossovers suggest that GM likely experiences volume and mix headwinds that exacerbate the cyclical profit headwinds,” Goldman analyst David Tamberrino said in a note Monday.

Shares of GM have handily outperformed the broader market, rising 28.1 percent year to date. AMD shares, meanwhile, have lagged the S&P 500 in 2017, having gained 4.4 percent. The S&P 500 is up 15.3 percent in 2017.

The Nasdaq closed little changed after hitting a record high earlier in the session. The index came off strong gains from Friday, when it rose 2.2 percent, marking its biggest one-day gain since 2016.

The index was boosted by better-than-expected quarterly results from big tech companies, including Amazon.

Apple is scheduled to report Thursday after the close.

A slew of corporate deals were announced on Monday. Lennar said it was buying CalAtlantic for $9.3 billion, creating the largest U.S. homebuilder. Lennar’s stock dropped 2.7 percent while CalAtlantic shares gained 22 percent.

For-profit colleges Strayer and Capella also agreed to merge in a stock-swap deal. Strayer shares gained 7.3 percent while Capella’s stock rose nearly 30 percent.

Stocks were coming off a record-setting session, with the S&P 500 surging to an all-time high Friday on the back of strong earnings. Last week also marked the busiest week of the current earnings season.

Wall Street will have its hands full with earnings again this week, with Apple, Starbucks, Qualcomm and Tesla, among others, set to report.

More than half of the S&P 500 has reported as of Friday, with 76 percent of those companies beating estimates on the bottom line while 67 percent have topped sales expectations, according to FactSet.

“This earnings season has been very company-specific,” said Mark Spellman, portfolio manager at Alpine Funds. “Companies that have reported well” have seen their stock rise. “The ones that haven’t been so good are down.”

Fred Imbert

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