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Wall Street eases as investors look past tax revamp

By April Joyner

NEW YORK (Reuters) - U.S. stocks fell on Tuesday as excitement over the likelihood of a tax code revamp was offset by concern over its effect on years of monetary policy stimulus and the future of interest rates.

The U.S. House of Representatives initially passed the tax legislation in an afternoon vote, but the bill included provisions that did not comply with Senate rules. The Senate was expected to vote this evening on a revised version of the bill, with the offending provisions removed. If the Senate approves the bill, as is expected, the House will vote again on Wednesday.

Stocks added to losses after the vote, which followed weeks of market gains on optimism that tax cuts would boost U.S. earnings and the economy. Some investors also said that much of those benefits were already reflected in stock prices.

The S&P 500 has climbed about 5 percent since mid-November when the House passed its tax overhaul bill.

"The tax rate we’ve certainly priced in (in stocks)," said Jack Ablin, chief investment officer at BMO Private Bank in Chicago. Investors may also be "celebrating the tax package but recognizing that what central banks have given us in the last years they could begin to take away.”

The bill, among other things, proposes lowering corporate tax rates to 21 percent from 35 percent, which investors are betting will boost profits as well as trigger share buybacks and higher dividend payouts.

The S&P 500 technology sector (.SPLRCT) fell 0.5 percent, with tech stocks weighing the most on the major indexes.

The Dow Jones Industrial Average (.DJI) fell 37.45 points, or 0.15 percent, to 24,754.75, the S&P 500 (.SPX) lost 8.69 points, or 0.32 percent, to 2,681.47 and the Nasdaq Composite (.IXIC) dropped 30.91 points, or 0.44 percent, to 6,963.85.

Earlier in the day, stocks were pushed lower as Treasury yields rose on strong housing data. Domestic home construction hit a 13-month high in November.

Apple (AAPL.O) fell 1.1 percent after broker Instinet downgraded the stock to "neutral," saying the supply-demand balance for the iPhone X suggested little space to raise sales estimates for the next quarter.

The consumer staples index's (.SPLRCS) 0.2 percent rise led gainers.

Altria (MO.N) rose 1.7 percent after Berenberg upgraded the stock saying a lower tax rate would boost the tobacco company's profit and shareholder payouts.

Wal-Mart (WMT.N) rose 0.9 percent after Citigroup upgraded the stock to "buy" on expectations that the retailer's shares will rise further in 2018.

Zimmer Biomet (ZBH.N) jumped 6.1 percent, the S&P's biggest gainer, after the company appointed a full-time chief executive.

Declining issues outnumbered advancing ones on the NYSE by a 1.81-to-1 ratio; on Nasdaq, a 1.82-to-1 ratio favored decliners.

Volume on U.S. exchanges was 6.6 billion shares, below the 6.8 billion average for the full session over the last 20 trading days.

(Additional reporting by Sruthi Shankar in Bengaluru and Rodrigo Campos in New York; Editing by Nick Zieminski and James Dalgleish)