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Stocks end lower as Apple hit by tax flap

Adam Shell
USA TODAY

Stocks ended a bit lower Tuesday after starting off in positive territory as investors digested news that Apple could owe back taxes in Ireland and continued to focus on what the Federal Reserve's next move on interest rates might be as Friday's key jobs report looms.

Traders work on the floor of the New York Stock Exchange on Aug. 26, 2016.  (Photo by Spencer Platt/Getty Images)

The Dow Jones industrial average ended down 49 points, or 0.3%. The Standard & Poor's 500 stock index shed 0.2%, and the Nasdaq composite ended 0.2% lower. All three indexes kicked off Tuesday's trading session less than 1% below their recent record closing highs.

Wall Street continues to waver on whether the Fed will hike interest rates for the first time this year, after Fed Chair Janet Yellen said Friday that the case for a rate increase had "strengthened" recently. There is a camp on Wall Street that believes the Fed will move at its Sept. 20-21 meeting if the August jobs report, set for release Friday, comes in strong.

Yellen: Case for rate hike 'has strengthened'

Also weighing on stocks Tuesday -- following Monday's 108-point Dow gain -- was the news surrounding iPhone maker Apple, a stock that has a sizable weighting in all three of the major U.S. stock indexes.

Apple must pay up to $14.5 billion in back taxes to Ireland, the European Union ruled Tuesday after the bloc's anti-trust arm concluded that the technology firm was given illegal tax benefits over two decades. Apple (AAPL) shares ended the day 0.8% lower, to $106 even.

In a letter, Apple CEO Tim Cook responded: "The European Commission has launched an effort to rewrite Apple’s history in Europe, ignore Ireland’s tax laws and upend the international tax system in the process. The opinion issued on August 30th alleges that Ireland gave Apple a special deal on our taxes. This claim has no basis in fact or in law. We never asked for, nor did we receive, any special deals. We now find ourselves in the unusual position of being ordered to retroactively pay additional taxes to a government that says we don't owe them any more than we've already paid."

Apple must pay up to $14.5B in back taxes to Ireland

Stock investors are closely watching the Fed's next move, as a rate hike would take the market by surprise, and likely continue the recent rise in the value of the U.S. dollar, which hurts the competitiveness and profitability of U.S.companies that do a lot of business abroad, as well as pressure oil prices, which are priced in dollars.

A Fed hike would likely push up interest rates in the U.S. as well. In early trading Tuesday, the yield on the 10-year U.S. treasury note was 1.570%, up fractionally from Monday.

Stocks in Europe were broadly higher. The Stoxx Europe 600 was up 0.5%. Shares were mostly higher in Asia, with stocks up in Hong Kong, mainland China, but slightly lower in Japan.

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