US stock markets retreated from near record levels as the Trump administration’s long-touted tax plan disappointed investors awaiting concrete policy detail.
The S&P 500 edged away from hitting a new record closing high, a level it has failed to breach since the beginning of March, and the Dow Jones Industrial Average closed 0.1 per cent lower at 20,975. Havens like gold and the Japanese yen gained in the final hours of New York trading.
The plan unveiled by President Donald Trump’s economic team, including a cut to the corporate tax rate from 35 per cent to 15 per cent and an incentive for multinational groups to repatriate trillions of dollars held overseas, was viewed by several investors as infeasible in its current form and unlikely to gain passage in Congress.
The Republican party would need near unanimity in the Senate to push the reforms through, a challenging prospect given that part of the party has expressed trepidation over larger deficit-fuelled spending.
“If you take a look at what was proposed it doesn’t give much more than what we have seen before,” said Charlie Ripley, fixed-income strategist at Allianz Investment Management. “Trump trying to bring the tax rate down to 15 per cent seems like a far stretch and it is likely this will not go anywhere in Congress.”
Wednesday’s rally in Treasuries accelerated after the plan was unveiled while the dollar fell 0.4 per cent from an intraday high. The US dollar index ended the day 0.2 per cent higher at 98.974. The yield on the 10-year Treasury, which moves inversely to its price, fell 3 basis points to 2.30 per cent.
Mr Ripley added that some of the reaction in Treasury markets may have also reflected a report in The New York Times citing a senior administration official that Mr Trump was likely to withdraw the US from the North American Free Trade Agreement, or Nafta.
The Canadian dollar weakened 0.3 per cent against the dollar, declining for its fourth consecutive day to close at 0.7343 to the dollar. The Mexican peso suffered its largest daily loss against the dollar since January.
The tax plan has muted a positive market tone set at the start of the week, after investor nerves were soothed by the result of the first round of the French election.
“We are in a rain delay at a baseball game,” said Megan Greene, chief economist at Manulife Asset Management. “We are all just trying to figure out what is going to come down the line and while that is happening it is hard for investors to act definitively.”