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Stocks snap 2-day winning streak, slip from records as Apple drags tech lower

  • Apple fell 1.1 percent after Nomura Instinet downgraded the tech giant's stock.
  • House members voted to pass the tax bill on Tuesday. The Senate is also expected to pass the measure. The bill would cut the federal corporate tax rate to 21 percent from 35 percent.

U.S. equities fell on Tuesday, as a decline in Apple shares pushed the broader tech sector lower.

The Dow Jones industrial average closed 37.45 points lower at 24,754.75. The S&P 500 declined 0.3 percent to 2,681.47, with tech falling 0.5 percent. The tech-heavy Nasdaq composite slipped 0.4 percent to finish at 6,963.85. The major indexes also snapped a two-day winning streak.

Apple fell 1.1 percent after Nomura Instinet downgraded the tech giant's stock to neutral from buy. In a note, the analyst said: "The stock's gains for the iPhone X supercycle are in the late innings." Apple is one of the most popular stocks on Wall Street and Main Street and rarely gets negative opinions from the former.

Tech has been the best-performing sector this year, rising nearly 40 percent in 2017, so investors may be using the downgrade as a signal to take profits into year-end.

Investors were also taking a pause after bidding stocks up in anticipation of the tax overhaul.

House members voted to pass the tax bill on Tuesday. The Senate is also expected to pass the measure. The bill would cut the federal corporate tax rate to 21 percent from 35 percent. Wall Street has been betting on this cut all year, pushing stocks to record highs.

Traders work on the floor of the New York Stock Exchange.
Brendan McDermid | Reuters
Traders work on the floor of the New York Stock Exchange.

"The slashing of the corporate tax rate will bump up the bottom line for most of the members of the S&P 500 whose constituents pay on average 27.4% of their income to the government," said Jeremy Klein, chief market strategist at FBN Securities, in a note. He also said that the "The certainty of this event will keep volatility muted which precludes share prices from taking a meaningful tumble in the short term."

Republican Sens. Mike Lee and Susan Collins — two of the last GOP holdouts on the tax bill — said Monday they would support the measure, increasing the likelihood of it passing the Senate.

Stocks were coming off a banner session on Monday. The three major indexes closed at record highs and the Nasdaq composite briefly topped 7,000 for the first time.

"The SPX gapped up yesterday after having broken out from a consolidation phase last week," said Katie Stockton, chief technical strategist at BTIG. "The uptrend shows no signs of exhaustion, and we anticipate a Santa Claus rally to allow the year to close on a strong note."

Equities have had a strong year. The Dow, S&P 500 and Nasdaq were up 25.5 percent, 20.2 percent and 29.9 percent, respectively, for 2017.

In corporate news, Darden Restaurants shares rose 6.8 percent before the bell after the company reported better-than-expected earnings and revenue. Darden also hiked its full-year guidance.

Truck maker Navistar saw its stock pop 7.4 percent after its quarterly earnings easily topped estimates.