The S&P 500 index has surged about 21 percent since the election of President Donald Trump a year ago, fueled by his promises to cut corporate taxes and other business-friendly measures.
Senate Republicans are unveiling a tax proposal that differs markedly on corporate, business and individual tax cuts from legislation detailed by their counterparts in the House of Representatives, Republican aides said.
The Senate proposal delays a corporate tax rate cut to 20 percent by a year and provides small-business owners with a deduction rather than a special business rate, said the aides.
Earlier on Thursday, uncertainty about the future of corporate tax rates pushed the S&P 500 down as much 1.0 percent, underscoring how much Wall Street is banking on a tax reduction., but the selloff was brief and stocks quickly recovered much of the dip.
The S&P 500 is trading at 18 times expected earnings, expensive compared with its 10-year average of 14.3, according to Thomson Reuters Datastream. Cutting corporate taxes would boost earnings and make stocks relatively less expensive.
"It's been a year since the election. We've gone up 22 percent on hopes of what the Trump agenda would bring, and while they're trying to work toward this thing, they haven't really accomplished much yet," said Michael O'Rourke, chief market strategist at JonesTrading in Greenwich, Connecticut.
"If progress is not made, the equity market should either pause or correct until meaningful progress is made."
The Dow Jones Industrial Average <.DJI> lost 0.43 percent to end at 23,461.94, while the S&P 500 <.SPX> declined 0.38 percent to 2,584.62.
The Nasdaq Composite <.IXIC> dropped 0.58 percent to 6,750.05.
The Philadelphia Semiconductor index <.SOX>, a top performer in 2017.
Six of the 11 major S&P 500 sectors fell, with industrials <.SPLRCI> down 1.28 percent and the technology <.SPLRCT> index off 0.85 percent.
Apple (>> Apple), Microsoft (>> Microsoft Corporation), Alphabet (>> Alphabet), Oracle (>> Oracle Corporation) and Facebook (>> Facebook) were among the stocks weighing most on the S&P 500.
Technology has been the best-performing S&P 500 sector so far this year, with a 37 percent rise. The sector's stretched valuations make it vulnerable to selling as investors worry that promised tax reductions might not emerge.
Roku (>> Roku Inc) soared 55 percent after the video streaming device maker's quarterly results and guidance beat expectations.
Macy's (>> Macy's Inc) jumped 10.98 percent after the department store operator's profit came in above expectations.
In extended trade, Nordstrom dropped 1.0 percent after that retailer reported quarterly sales short of analysts' expectations.
Walt Disney Co (>> Walt Disney Company (The)) lost 2.0 percent after the bell following its quarterly report while chipmaker Nvidia (>> NVIDIA Corporation) rose nearly 2.0 percent after its report.
During the session, Dish Network (>> Dish Network) rose 3.22 percent after the satellite and internet TV provider added subscribers in the United States in the third quarter and reduced the rate at which it lost existing customers.
Declining issues outnumbered advancing ones on the NYSE by a 1.67-to-1 ratio; on Nasdaq, a 1.62-to-1 ratio favored decliners.
About 7.4 billion shares changed hands on U.S. exchanges, above the 6.6 billion daily average over the last 20 sessions.
(Additional reporting by Tanya Agrawal and Caroline Valetkevitch; Editing by Dan Grebler)
By Noel Randewich