Stock indexes wobble as White House unveils tax plan
Associated Press
NEW YORK
Stock indexes wobbled between modest gains and losses Wednesday as the White House unveiled broad outlines of its plan to slash tax rates but left many of the details to be determined.
Anticipation for a big tax cut, along with looser regulations on businesses, have been two of the main drivers behind the stock market’s surge since November, when Republicans swept into Washington. The White House delivered a big number Wednesday, when officials said they hope to cut the top corporate tax rate to 15 percent from 35 percent.
But many specifics are still to be negotiated, such as how much it will affect the government’s budget deficit, and they will need to be hammered out with Congress. That left investors questioning exactly how much benefit will flow through to corporate profits and how much stock prices should climb beyond what they already have.
“Tax reform will be good, but a lot of that has already been priced into the market,” said David MacEwen, co-chief investment officer for American Century Investments.
The proposal for a 15- percent corporate tax rate is likely just an opening salvo, and negotiations with Congress may push that figure higher, analysts said. Any corporate tax cut would help boost profits for businesses, which would help justify the 11.6 percent surge for the S&P 500 since Election Day. Some investors are worried stocks have grown too expensive because prices have climbed faster than corporate profits.
MacEwen said several elements of the proposal would be beneficial, including how foreign profits would be treated, but what Washington gets approved may fall short of the stock market’s expectations. Also still uncertain is how much the final proposal would boost the economy, which would drive profits further and justify yet more stock price gains.