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.
“People are rotating into consumer discretionary and away from technology because of tax advantages from the new bill,” said Michael Matousek, head trader at U.S. Global Investors Inc in San Antonio, Texas.
Microsoft lost 3.77 percent, Nvidia slumped 5.57 percent and PayPal Holdings fell 5.75 percent.
Also lifting financial stocks was a broad expectation that the Federal Reserve will increase interest rates in December, which makes bank lending more profitable.
The S&P 500 information technology index has surged 34 percent in 2017, the market’s top performer. But after it fell 3 percent since Nov. 28, investors on Monday became more concerned about the longevity of the sector’s rally.
The Dow Jones Industrial Average rose 0.24 percent to end at 24,290.05 points, while the S&P 500 lost 0.11 percent to 2,639.44. Earlier in the session, the S&P 500 had touched a record high.
The Nasdaq Composite dropped 72.22 points to end at 6,775.37.
The S&P 500 is up 18 percent in 2017 on strong corporate earnings and solid economic growth, as well as expectations that President Donald Trump and the Republican-controlled Congress would cut taxes and corporate regulation.
The index is now trading at about 18.2 times expected earnings, its highest level since 2002, according to Thomson Reuters Datastream.
Many department stores pay high tax rates and stand to benefit from the Republican cuts. Macy’s jumped 6.65 percent and Nordstrom surged 3.87 percent.
Media stocks rose after the Financial Times reported that Twenty-first Century Fox had resumed talks to potentially sell most of its assets to Walt Disney.
Disney added 4.72 percent and Fox climbed 2.80 percent.
CVS Health shares lost 4.57 percent after the company agreed to buy Aetna for $69 billion in the year’s largest corporate acquisition. Aetna shares fell 1.44 percent.
Advancing issues outnumbered declining ones on the NYSE by a 1.03-to-1 ratio; on Nasdaq, a 1.27-to-1 ratio favored decliners.
About 7.8 billion shares changed hands on U.S. exchanges, well above the 6.7 billion daily average for the past 20 trading days, according to Thomson Reuters data.
(Additional reporting by Sruthi Shankar and Rama Venkat Raman in Bengaluru; Editing by Frances Kerry and Nick Zieminski)
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