GE slump, tax plan doubts pressure Wall St

13 Nov, 2017

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(Reuters) – Wall Street’s main indexes were under pressure in early afternoon trading on Monday after GE shares hit their lowest in five years and investors fretted over the future of the U.S. tax reform plan.

General Electric (GE.N) slashed its dividend and profit forecast earlier in the day, while unveiling a plan that narrowed its focus on aviation, power and healthcare.

Shares of the industrial conglomerate fell 7.6 percent as investors worried that plans for a years-long transformation did not show how the slimmed-down company would generate cash to justify its stock valuation.

Investors are closely tracking developments around the tax bill after Senate Republicans last week unveiled a new plan that differed from the House of Representatives’ version.

“The process is moving forward. We’ve listened to snippets of state local taxes and deductions. But we won’t really know what the end result looks like unless they put together in the Senate and House version,” said Art Hogan, chief market strategist at Wunderlich Securities in New York.

“The real difficulty will be pulling the two things together.”

Hopes of lower taxes, one of President Donald Trump’s main campaign promises, have helped drive the S&P 500 up about 20 percent since the 2016 presidential election.

At 12:22 p.m. ET (1622 GMT), the Dow Jones Industrial Average .DJI was up 21.8 points, or 0.09 percent, at 23,444.01, the S&P 500 .SPX was up 2.15 points, or 0.08 percent, at 2,584.45 and the Nasdaq Composite .IXIC was up 5.44 points, or 0.08 percent, at 6,756.38.

Eight of the 11 major S&P indexes were higher, led by defensive utilities .SPLRCU and consumer staples .SPLRCS stocks.

Industrial stocks were the biggest laggards after GE’s decline.

Toymaker Mattel (MAT.O) jumped about 22 percent, becoming the biggest S&P percentage gainer, after a report that rival Hasbro (HAS.O) made an approach to acquire the company. Hasbro rose 7 percent.

Qualcomm (QCOM.O) gained nearly 2 percent after the chipmaker rejected rival Broadcom’s (AVGO.O) $103-billion takeover bid, saying the offer “dramatically” undervalued the company.

Declining issues outnumbered advancers on the NYSE by 1,581 to 1,229. On the Nasdaq, 1,498 issues fell and 1,358 advanced.

Reporting by Sruthi Shankar in Bengaluru; Editing by Anil D’Silva

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