Stocks close at all-time highs as odds of tax bill passing increase
The Dow Jones industrial average jumped 139 points to 24,651.74, a record. The S&P 500 gained 0.9 percent to finish at 2,675.81, also hitting an all-time high, with financials, staples, health care and tech all rising at least 1 percent. The Nasdaq composite advanced 1.2 percent to a record close of 6,936.58.
The plan will likely cut the corporate tax rate to 21 percent from 35 percent. Expectations of lower corporate taxes have helped boost stocks to record levels this year. Entering Friday’s session, the S&P 500 had risen 18.5 percent.
Lawmakers are expected to vote on the bill next week.
“A cut in the corporate tax rate, effective next year, along with continued deregulation should bolster profits,” said Ed Yardeni, president and chief investment strategist at Yardeni Research. “Industry analysts are projecting earnings gains of 10.9 percent this year, 11.4 percent next year, and 10.1% in 2019. Presumably, these numbers don’t fully reflect the likely big positive impact of a cut in the corporate tax rate next year.”
The major averages reached their session highs following reports that Republicans had agreed to extend the child tax credit. Sources told CNBC that Republican Sen. Marco Rubio will support the tax bill after the tweaks.
There had been concerns about the tax bill passing this year, after Rubio said Thursday he would vote against the bill if the proposed child tax credit was not extended. Fellow Republican Sen. Mike Lee also said Thursday he was undecided on the GOP plan.
The major indexes were trading higher before the news about the senators broke, but closed lower on Thursday. The Dow also snapped a five-day winning streak.
Bob Corker, a Republican senator from Tenessee who originally opposed the bill, said Friday he would vote in favor of the measure.
“I think the bill is likely to pass, but if it doesn’t, we could see a 5-to-10 percent decline in stocks,” said Ed Keon, managing director and portfolio manager at QMA, the quantitative and dynamic asset allocation business of PGIM.
The Dow and S&P posted their fourth consecutive weekly gains, while the Nasdaq snapped a two-week slide.
In corporate news, shares of Hess jumped 2.3 percent after reports that Elliott Management is pushing for CEO John Hess to step down or for the company to sell all or part of its business.
Meanwhile, Costco shares rose 3.3 percent after the company reported better-than-expected quarterly earnings and sales.
Source: CNBC
