S&P 500; US Indexes Fundamental Daily Forecast – Investors Focused on Earnings, Tax Cuts

The major U.S. equity indexes closed lower on Monday as concerns over the prospects for tax cuts and worries over the latest corporate earnings reports encouraged investors to take profits and reassess their short-term outlook for stocks. The sell-off snapped the S&P 500 and the Dow Jones Industrial Average’s six-day winning streak.

The benchmark S&P 500 Index settled at 2564.98, down 10.23 or -0.40%, the blue chip Dow Jones Industrial Average closed at 23273.96, down 54.67 or -0.23% and the tech-based NASDAQ Composite ended the session at 6586.19, down 42.86 or -0.65%.

Forecast

There has been no follow-through to the downside during Tuesday’s pre-market futures session. At 0857 GMT, the December E-mini S&P 500 Index futures contract is trading 2564.50, up 1.00 or +0.05%, the December E-mini Dow Jones Industrial Average futures contract is at 23266, up 38 or +0.16% and the December E-mini NASDAQ-100 Index is trading 6069.00, up 4.25 or +0.06%.

This is an important week for stock investors since nearly 200 S&P 500 companies are slated to report quarterly earnings. This is likely to be the key driver for stocks all week.

Traders will also be sensitive to any news regarding tax reform. The debate over this matter was set in motion with last week’s approval of the Federal budget. Expectations for a major tax overhaul have been credited with helping spur the recent surge in U.S. stocks in the wake of President Trump’s presidential election win in November 2016.

One concern for investors was reported last week by The Wall Street Journal. It reported there are proposals about capping the amount that Americans may contribute before taxes to 401(k) plans as a way to generate revenue. However, President Trump tweeted on Monday, saying that there will be no changes to 401(k) rules, which he called “a great and popular middle class tax break that works.”

Although the dominate trend is up and likely to remain intact, Monday’s price action suggests investors may be a little nervous about the stock market’s lofty levels. People are focused on earnings and tax cuts, but each day may bring worries about future earnings and different proposals to the tax reform plan.

This may give investors an excuse to limit their buying or reduce positions until there is more clarity about the new tax package.