New York, United States | AFP – Wall Street stocks retreated from records Tuesday, pausing from the euphoria over a tax cut bill, while the stronger euro weighed on equities in Paris and Frankfurt.
Major US equity indices, which closed at records the last two sessions, were in negative territory most of the day, with the broad-based S&P 500 ending down 0.3 percent amid weakness in Apple, Netflix and other tech companies.
The market "is taking a bit of a breather," said Sam Stovall, chief investment strategist at CFRA Research. "It has done so well based of the likelihood of the passage of the tax reform."
The House, the lower chamber of the US Congress, initially approved the controversial $1.5-trillion package of tax cuts for businesses and individuals by a vote of 227-203, with all Democrats voting "no." However, due to a rules mix up the House had to vote on the measure again.
The outcome for the most comprehensive revamp of the nation’s tax code in three decades likely will be the same, and the measure would then will head to the Senate for a decisive vote expected to take place late Tuesday night, after which it will be sent to President Donald Trump for his signature.
Given the equity gains already seen in recent weeks, some analysts predicted the market could pull back after the bill actually passed. But others are eyeing S&P 500 targets of around 2,800 in anticipation of higher corporate profits once the tax reform takes effect.
"Today’s slight losses, especially in the US, are more of a pause for breath before the rally moves on once more; the reform bill still seems certain to pass, and this still means that investors are going to be buying stocks as year-end nears," said Chris Beauchamp, chief market analyst at online trading firm IG.
Foreign exchange markets were taking a skeptical reading of the tax cut’s impact, selling off the dollar compared with the euro.
Omer Esiner of Commonwealth Foreign Exchange said "the bill’s ultimate impact on the economy remains questionable."
"The dollar’s upside… is likely to be limited given that the outlook for Fed monetary policy remains largely constrained by a lack of inflation in this economic cycle."
The euro’s gains came after data from the Ifo economic institute revealed that Germany’s business climate index hit 117.2 points in December, slightly below November’s historic 117.5.
It comes as Germany remains mired in a political stalemate, with Chancellor Angela Merkel still trying to form a new government after coalition talks collapsed last month.
Frankfurt’s DAX 30 index and the Paris CAC 40 both shed 0.7 percent as the euro gained against the dollar.