Benchmarks closed mostly in the red with both the S&P 500 and the Nasdaq finishing the day with losses, while the Dow closed in positive territory. U.S. Senate Republicans finally approved the tax cut Bill over the weekend which boosted bank stocks that eventually helped the Dow to touch new highs. However, rising tax cuts prospects weighed on tech stocks, which in turn pulled the S&P 500 and Nasdaq lower.
The Dow Jones Industrial Average (DJIA) increased 0.2%, to close at 24,290.05. However, the S&P 500 Index (INX) fell 0.1% to close at 2,639.44. The tech-laden Nasdaq Composite Index (IXIC) closed at 6,775.37, losing 1.1%. A total of 7.8 billion shares were traded on Monday, higher than the last 20-session average of 6.7 billion shares. Advancers outnumbered decliners on the NYSE by a 1.03-to-1 ratio. On Nasdaq, a 1.27-to-1 ratio favored declining issues. The CBOE VIX increased 2.2% to close at 11.68.
Dow Hits New Highs
Early Saturday, U.S. Senate Republicans passed the much awaited tax Bill after they won a vote 51 to 49 to pass the tax overhaul bill in the Senate. According to the Tax Cuts and Jobs Act, corporate tax rate will be reduced to 20% from 35%, while companies will be allowed to pay a 5% tax on reinvested earnings and 10% tax on deferred cash earnings. Lower tax rate prospects boosted financial stocks.
Additionally, strong rate hike chances post Fed’s December 12-13 meeting also had a positive impact on the broader financial sector. According to the CME Fedwatch, possibility of a rate hike this month is around 90.2%.
The Financial Select Sector SPDR (XLF) increased 1.5% and was the best gaining sector among the S&P 500. Two major Dow components from the sector, JPMorgan Chase & Co. JPM and The Goldman Sachs Group, Inc. GS increased 2.1% and 0.7%, respectively.Both the companies have a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here .
Tech Selloff Weighs on S&P 500 and Nasdaq
In the aftermath of Senate’s move to approve the tax cut Bill, investors shifted their focus from technology stocks to other sectors like financials. Valuation concerns resulted in a selloff of tech stocks. The Technology Select Sector SPDR (XLK) fell 1.6%, becoming the worst performer among key S&P 500 sectors.
The well-known FAANG stocks were key losers among the broader technology sector. Shares of Facebook, Inc. FB , Apple Inc. AAPL , Amazon.com, Inc. AMZN , Netflix, Inc. NFLX and Alphabet Inc. GOOGL increased 2.1%, 0.7%, 2.4%, 1.5% and 1.3%, respectively.
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