MARKET SNAPSHOT: Trump's Tax Reform May Rekindle The Dying Embers Of The Stock-market Rally

By Sue Chang, MarketWatch Features Dow Jones Newswires

Nearly 200 companies are slated to report quarterly earnings

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Just when it looked like the stock market was drowning in a sea of worry, President Donald Trump threw it a much-needed life line.

Trump on Friday said he will reveal a "massive" tax package (http://www.marketwatch.com/story/trump-today-big-announcement-coming-wednesday-on-tax-reform-president-says-2017-04-21) that will deliver cuts "bigger I believe than any tax cut ever."

The president plans to unveil the details on Wednesday, reiterated by a Saturday tweet:

(http://twitter.com/realDonaldTrump/status/855817226078879748)

Some of the stock market's sluggishness since the S&P 500 index hit a record on March 1 has been blamed on the absence of meaningful policy change since Trump took office. As a result, any hints that the president is committed to delivering on tax reform and deregulation will help to offset worries about soft economic data, most notably tepid auto and retail sales.

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But even that may be a boon for stocks as economic weakness could prompt the Federal Reserve to opt for gradual normalization of monetary policy, according to strategists at Yardeni Research.

Then there is also the chance that the U.S. bureaucracy may come to a screeching halt next week if Republicans and Democrats are unable to reach an agreement on the spending bill to fund the government for the remainder of the fiscal year.

The deadline to get the deal done falls on April 29, Trump's 100th day in office.

Even so, with the much-anticipated tax reform a step closer to reality, investors will be emboldened to return to the market to chase stocks higher. That the corporate-friendly measure comes on the back of an upbeat earnings season will give the market added upside momentum.

Analysts are projecting one of the best quarterly earnings in more than five years on the back of a recovery in both the U.S. and global economies.

Almost 200 companies are slated to release earnings next week including Dow components Caterpillar Inc. (CAT) and Boeing Co. (BA) and tech giants Microsoft Corp. (MSFT), Alphabet Inc. (GOOGL) (GOOGL) and Intel Corp. (INTC).

Still, the French election could be the fly in the market's soup.

See also: Here's how French election could test U.S. stock market's resilience (http://www.marketwatch.com/story/heres-how-french-election-could-test-us-stock-markets-resilience-2017-04-21)

On Sunday, French voters will go to the polls to choose a new leader in a closely watched election that is emerging as an important test of whether the wave of populism that is sweeping across the globe will find traction or fizzle.

The race is a four-way contest between Emmanuel Macron, Marine Le Pen, François Fillon, and Jean-Luc Melenchon although pundits expect centrist Macron and far-right National Front leader Le Pen to win the first round for a runoff vote in May. At stake is not only the future of the third largest economy in Europe but also the eurozone given pledges by Le Pen and Melenchon to quit the union if they win.

Read:When are the French election results out on Sunday? (http://www.marketwatch.com/story/when-are-the-french-election-results-out-on-sunday-2017-04-20)

Strong showings by Euroskeptics Le Pen and Melenchon could result in "risk aversion which could weigh on markets while Macron or Fillon could spark a move back into risk markets and potentially kick off a rally for stocks," said Colin Cieszynski, chief market strategist at CMC Markets.

The S&P 500 fell 7.15 points, or 0.3%, to close at 2,348.69 and the Dow Jones Industrial Average (http://www.marketwatch.com/story/us-stocks-set-for-small-opening-gains-as-french-election-fears-linger-2017-04-21) shed 30.95 points, or 0.2%, to finish at 20,547.76 on Friday. The Nasdaq Composite slid 6.26 points, or 0.1%, to end at 5,910.52.

(END) Dow Jones Newswires

April 22, 2017 13:16 ET (17:16 GMT)