By Riva Gold and Kenan Machado
-- U.S. stocks lower in early trading
-- European stocks pause after winning streak
-- Bond yields keep climbing
U.S. stocks slipped Thursday following gains a day earlier.
The Dow Jones Industrial Average fell 30 points, or 0.1%, to 22311 shortly after the opening bell. The S&P 500 lost 0.1%, while the Nasdaq Composite declined 0.2%.
Energy shares rose alongside oil prices, but it wasn't enough to offset declines elsewhere.
The losses chipped away at gains among technology firms that had helped lift indexes higher Wednesday, ending a four-session losing streak for the Dow industrials. Smaller companies also had rallied after the Republican proposal to overhaul the tax code was unveiled Wednesday.
"In the short term, this is probably positive for growth," said Luca Paolini, chief strategist at Pictet Asset Management, noting that if the plan is implemented it would likely boost bond yields, financial stocks and shares of smaller companies that had come under pressure when investors were growing increasingly skeptical of tax changes earlier this year.
Republicans are proposing to sharply reduce tax rates on business and many individuals, prompting investors to sell bonds on expectations that the cut would boost growth and accelerate the Federal Reserve's plans to lift interest rates.
Investors appeared to still be digesting the tax proposal and its prospects, as shares of financial firms and smaller companies were little changed in early trading Thursday.
"We need to wait and see how much of this will be implemented and what kind of reaction the Fed will have," said Mr. Paolini.
Meanwhile, fresh data pointed to steady U.S. economic growth, which could encourage the Fed to proceed with a third rate increase later this year.
U.S. economic output grew at a 3.1% annual rate in the second quarter, slightly stronger than previously thought and marking the best growth in two years, according to revised data released by the Commerce Department on Thursday.
The number of Americans applying for new unemployment benefits rose last week, the Labor Department said Thursday, at least partially reflecting job losses because of major summer storms. Still, overall jobless claims remain historically low.
The yield on the benchmark 10-year Treasury note climbed to 2.323%, according to Tradeweb, from 2.309% Wednesday, when it notched its biggest daily gain since March. Yields rise as prices fall.
Investors have been stepping up bets that the Fed was more likely to raise interest rates in December following speeches from Fed officials earlier this week, which has contributed to the rise in government bond yields.
The WSJ Dollar Index, which tracks the dollar against a basket of 16 currencies, swung between small gains and losses Thursday after its biggest three-day gain this year, and was recently down 0.2%.
Elsewhere, the Stoxx Europe 600 was up less than 0.1%. Japan's Nikkei Stock Average rose 0.5%, recovering from Wednesday's declines, while Chinese markets faced selling pressure ahead of a week-long break. The Shanghai Composite Index fell 0.2% and Hong Kong's Hang Seng Index fell 0.8% to a six-week low.
--Michael Wursthorn contributed to this article.
Write to Riva Gold at [email protected] and Kenan Machado at [email protected]