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Stocks Close Lower on Senate Plan That Would Delay Tax Cuts

Stocks fell Thursday, pulling back from record highs, on worries that tax reform could be delayed until 2019.

by Fred Imbert and Alexandra Gibbs

(CNBC) – The Washington Post reported that a Senate Republican plan could push tax reform back to 2019.

“That’s what gave us this new leg down,” Art Cashin, the director of floor operations at UBS, said on CNBC’s “Squawk Alley.”

“There’s also some speculation in Washington circles that when the president finishes his trip and comes back, there may be some more legal troubles for members of the cabinet.”

The major indexes had recovered some of the losses from earlier in the session prior to the report’s release.

The Dow lost 101 points. The S&P 500 shed 0.38 percent, with information technology as the leading decliner. The Nasdaq lagged, falling 0.58 percent.

“We expect short-term momentum to deteriorate temporarily, triggered by technology stocks as they (finally) react to overbought extremes.” said Katie Stockton, a chief technical strategist at BTIG. “A buying opportunity is likely to present itself in 2-3 weeks based on former setups of this nature.”

ech is by far the best-performing sector in the S&P 500 this year. The sector is up 37 percent in 2017, boosted by strong earnings from companies in the space.

Stocks posted record closing highs on Wednesday, adding to their already strong gains for the year. The S&P 500, Dow and Nasdaq are all up at least 15 percent in 2017.

“The market is digesting its recent gains,” said Mark Luschini, a chief investment strategist at Janney Montgomery Scott. “After a prolonged rally, everyone gets worried that they will be caught off-guard when the music stops.”

Also giving investors pause was a decline in risky high-yield bonds. The iShares iBoxx High Yield Corporate Bond exchange-traded fund (HYG) fell 0.5 percent Thursday and has pulled back 1.6 percent over the past month. Wall Street looks at high-yield bonds as a leading indicator for stocks.

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