Senate Plan For Delayed Corporate Tax Cut Shakes The Market

News on the Senate tax plan sent the stock market tumbling on Thursday.

What Happened

Republican Senate Finance Committee member Bill Cassidy said a tax reform plan proposed by Senate Republicans would delay corporate tax cuts until 2019. President Trump had proposed slashing the corporate tax rate from 35 percent to only 20 percent, a move that could provide a major earnings tailwind for American companies. Trump has also floated the idea of a repatriation holiday to allow U.S. companies with overseas cash to bring that cash back into the U.S. economy at a reduced tax rate.

Why It's Important

Analysts have attributed much of the S&P 500’s gains over that past year to high hopes for the Republican agenda of healthcare reform, tax cuts and corporate deregulation. However, uncertainty about tax reform may lead to companies and consumers holding off on spending, and Thursday’s drop may be just the tip of the iceberg.

Investor Reaction

The S&P 500 was on track for its worst day in months, down more than 1 percent on Thursday. Here’s a look at how several popular ETFs were trading following the tax reform news:

• SPDR S&P 500 ETF Trust SPY was down 0.9 percent.
• PowerShares QQQ Trust, Series 1 (ETF) QQQ was down 1.3 percent
• ProShares Trust Ultra VIX Short Term Futures ETF UVXY was up 9.8 percent.
• Credit Suisse AG - VelocityShares Daily 2x VIX Short Term ETN TVIX was up 8.5 percent.
• ProShares Trust II SVXY was down 4.5 percent.
• iPath S&P 500 VIX Short Term Futures TM ETN VXX was up 4.8 percent.
• iShares iBoxx $ High Yid Corp Bond (ETF) HYG was down 0.5 percent.

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