Tax ruling sparks selloff of once-hot MLPs, and other energy stocks

A tax ruling triggered a selloff in MLP exchange-traded funds and MLPs on Thursday, with the headwinds spilling over to the broader energy sector as midstream companies bore the brunt of the losses.

The Federal Energy Regulatory Commission said Thursday it will no longer allow master limited partnership natural gas and oil pipelines to recover an income tax allowance in cost-of-service rates.

The Alerian MLP AMLP, +1.54% exchange-traded fund dropped as much as 11% on Thursday, and was recently down more than 7%, on track for its lowest close and its largest percentage decrease in two years.

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