The markets have been looking for a timeline that includes some sense of how tax cuts will be paid for. Instead, there are signs that the Trump administration could hit roadblocks. Market strategists said things would go most smoothly for tax reform if Trump supported the plan being put forward by the House. But that plan is already meeting opposition in the Senate, with some senators saying they will not back a key aspect — the border adjustment tax.
Utah Sen. Orrin Hatch, chair of the Senate Finance Committee, said on CNBC Tuesday that tax reform could have a hard time gaining approval in the Senate.
There was also a Bloomberg report Tuesday morning that highlighted an already known split within the White House about the border adjustment tax, a scheme under which exports are not taxed, but imports are. Border adjustment is designed to boost domestic manufacturing.
Trump has not taken a definitive stand on border adjustment, but reports say adviser Steve Bannon, Chief of Staff Reince Preibus, and Commerce Secretary Wilbur Ross all favor it, while Treasury Secretary Steven Mnuchin and National Economic Council director Gary Cohn oppose it.
"Markets want to see details," said Peter Boockvar, chief market analyst at the Lindsey Group. He pointed to a report from CNBC's John Harwood noting that there's not yet any White House replacement plan for Obamacare. That's despite that tax reform has been promised only after the Affordable Care Act is replaced, and Mnuchin has set an August deadline for tax reform.
In general, Treasury yields have been backsliding for several weeks.
"Every week we come in with a little bit lower yields, despite the fact you have these inter-week selloffs, only to find you have no details," said John Briggs, head of strategy at NatWest Markets.
Yields jumped in late trading after New York Fed President William Dudley was the latest Fed official to suggest the Fed sees a better case to raise rates. The 2-year was at 1.26 percent.
Stocks closed on the soft side ahead of Trump's speech. The Dow Tuesday broke a 12-day streak of record closes, after tying a 1987 run on Monday. The Dow slipped 25 to 20,812. The S&P 500 fell 6 points to 2363. Nasdaq was down 36 at 5825.