The NASQAD 100 index ended with a significant loss of 1.05 percent to close at 6259.6, after hitting an intra-day all-time high earlier in the day, with banks and retailers surging and technology companies falling as investors realigned their portfolios in hopes of benefiting from expected corporate tax cuts.
For Nasdaq 100 on Monday, the biggest gainers of the session were Discovery Communications Inc (NASDAQ: DISCA), which rose 7.14 percent or 1.39 points to close at 20.85. O’Reilly Automotive Inc (NASDAQ: ORLY) gained 6.82 percent or 15.99 points to end at 250.39 and Discovery Communications C Inc (NASDAQ: DISCK) was up 6.09 percent or 1.12 points to 19.52 in late trade.
However, the biggest losers included Align Technology Inc (NASDAQ: ALGN), lost 11.13 percent or 28.27 points to end at 225.80, while Intuitive Surgical Inc (NYSE: ISRG) declined 6.73 percent or 26.71 points to 369.95 and Adobe Systems Incorporated (NYSE: ADBE) shed 6.17 percent or 11.08 points to close at 168.44.
The major reason why the Senate bill dragged the high-tech stocks is that it is still retaining 20% corporate alternative minimum tax, which is a particularly important break for California’s high-tech industry.
Besides that, Investors freed up money to buy banks, department stores and other stocks seen benefiting from lower taxes by selling technology stocks, which have become relatively expensive after leading the market’s gains this year.
Since the House and Senate have now passed their respective tax bills. Next, they have to figure out how to reconcile their differences, expecting that a final bill would be passed by the end of the year and be sent to President Trump’s desk.
The House and Senate bill have their biggest features in common: They would both slash the corporate tax rate from 35 percent to 20 percent, a historic reduction in the taxes levied on businesses at a time when Americans support raising taxes on corporations.
But there are also some big differences, including how permanent this tax overhaul would be. The House bill makes its changes to the individual tax code permanent; the Senate bill would start next year which reduces market expectations, and allow many major provisions to expire after 2025 in order to comply with Senate rules that limit how much a bill that can’t be filibustered can increase the federal deficit.
The medium- and long-term outlook for the U.S. stock would be positive due to economic stimulus by the new tax bill. For the short term, however, a potential risk still exists as the differences between the House and Senate bill, which have not reached consensus.
Technically despite a great loss yesterday, the Nasdaq 100 index is still moving along with the developing ascending price channel, starting from early this year. It doesn’t seem to break the channel for next few days.
When we analyse with “Ichimoku”, after a significant retreat the index may find support at “Kijun Sen”, which represents 50-day moving average. In the event that it continues to break lower, further decline may occur, which should catch more cautious by investors.
Chart 1: NAS100 Daily
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