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Stocks close little changed after Trump unveils plan for tax cuts

CNBC logo CNBC 4/26/2017 Fred Imbert

Stocks ended little changed Wednesday as traders assessed President Donald Trump's outline for tax reform

The Dow shed 21 points, with Procter & Gamble contributing the most losses. The S&P 500 and Nasdaq closed flat after also giving up earlier gains.

"The discussion around the tax plan is a positive for the market," said John Conlon, chief investment officer at People's United Wealth Management. But "I don't think the market is excited; I think it takes some pressure off the market, but there are still questions about some of the details."

Top White House officials outlined President Donald Trump's tax plan Wednesday, a proposal they said would be the "biggest tax cut" in U.S. history. The proposal slashes the corporate tax rate to 15 percent from 35 percent.

The White House added there will be a "one-time tax" on the trillions of dollars held by corporations overseas. However, Treasury Secretary Steven Mnuchin said the rate for that tax has yet to be determined.

Expectations for lower corporate taxes have been a boon for stocks ever since Trump was elected in November. Still, the Trump White House has failed to provide specifics on what these tax cuts might look like.

It's time for the administration to "go big or go home and a 15% corporate tax rate will certainly make that happen," said Peter Boockvar, chief market analyst at The Lindsey Group, in a note to clients.

"I'll leave it to others to figure out if and how we get there (will obviously be tough) but the implications will have to also be measured by any change in interest rates in response in gauging the impact on corporate earnings and for other obligations," he said.

Trump outlined his tax reform vision ahead of a potential government shutdown. Government funding will end Friday unless Congress can agree on at least a temporary funding resolution.

"I think some of the hesitancy in the market has to do with the potential government shutdown later this week," said Randy Frederick, vice president of trading and derivatives at Charles Schwab.

"There's no historical precedent" for a market downturn during a government shutdown, he said. "But because the Trump presidency is different from any we've ever had, there's going to be some hesitancy."

Meanwhile, earnings season carried on, with PepsiCo, United Technologies, Procter & Gamble and Twitter all posted a better-than-expected profit. Twitter's stock popped about 12 percent after reporting.

This earnings season has shown thus far that Corporate America did very well last quarter. Of the 181 S&P 500 components that had reported as of Wednesday, 77 percent had topped earnings expectations while 67 percent beat on the top line, according to data from The Earnings Scout.

"Remember though solid 1Q 2017 results only confirm what has already happened in the markets! 1Q 2017 results should not be used to infer what is going to happen," said Nick Raich, CEO of The Earnings Scout, in a note. "For that information, look to the direction of 2Q 2017 EPS estimate revisions."

He said that second-quarter earnings growth expectations have fallen every week this earnings season since March 22.

There were no major economic data reports released Wednesday, but Wall Street looked ahead to Friday's first-quarter GDP report.

"What concerns me is the Fed is raising rates in a modest economy with earnings growing modestly," said Phil Blancato, CEO of Ladenburg Thalmann Asset Management. "The rate of change in the economy is changing. The consumer is healthy but not necessarily spending money."


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