Rudd’s MarketView Tuesday, December 5, 2017

Summary

The major equity indexes were lower on Tuesday, as a technology rebound lost steam and Disney retreated, while investors assessed how a Republican tax overhaul would impact corporate earnings. The S&P 500 index fell for a third straight session, a streak not seen since early August, reducing the index’s return this year to 17 percent. Ten of the 11 major S&P sectors fell, led by losses in telecom services and utilities.

Buoyed by a 2.53 percent increase in Electronic Arts, the S&P 500 information technology index ended the trading day up 0.21 percent, but pared earlier gains of as much as 1.39 percent.

This year’s top-performing technology sector was still down nearly 4 percent over the past week, as money shifted to banks, retailers and other stocks seen as likely to benefit the most from tax cuts.

The bill passed on Saturday by Republican senators included a last-minute change retaining the corporate alternative minimum tax, or AMT, which had initially been removed.

That put the Senate on a collision course with the House, whose own tax bill repealed the corporate AMT and who are already calling for the tax to be eliminated in the final legislation. Including the AMT could negate parts of the bill seen as beneficial to tech companies and other corporations. Such a tax cut could boost S&P 500 earnings next year by an extra 9 percent.

Shares of Twenty-First Century Fox fell 0.30 percent after a report that Disney (DIS.N) was in the lead to acquire much of Fox’s media empire, though rival suitor Comcast remained in contention. Disney shares fell 2.72 percent and Comcast slipped 1.98 percent.

McDonald’s rose 1.37 percent, providing the largest boost to the Dow, after Jefferies upgraded the stock to a “buy” rating.

Toll Brothers fell 7.36 percent after the luxury homebuilder’s profit and revenue missed analysts’ expectations as it sold homes at prices lower than its own estimates.

Approximately 6.9 billion shares changed hands on the major domestic equity exchanges, a number that was just above the 6.7 billion share daily average for the past 20 trading days, according to Thomson Reuters data.