U.S. Stocks Jump on Senate Tax Bill

By Christopher Whittall Features Dow Jones Newswires

U.S. stocks jumped Monday after the Senate passed a tax bill over the weekend, setting the stage for lawmakers to attempt to push a final bill to the White House before Christmas.

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The Dow Jones Industrial Average rose 234 points, or 1%, to 24466 shortly after the opening bell. The S&P 500 added 0.4%, and the Nasdaq Composite advanced 0.7%.

Investors dumped assets that many consider havens, like U.S. Treasurys and gold, while lifting the dollar.

The Senate passed revisions to the U.S. tax code Saturday after Republicans overcame internal divisions, moving one step closer to pushing through $1.4 trillion in tax cuts. The House and Senate still need to reconcile competing versions of the tax plan, something GOP leaders hope to do by Christmas.

Cuts to the corporate tax rate could boost corporate earnings growth and help the long U.S. stock rally keep going, investors and analysts say.

Ronald Temple, head of U.S. equity at Lazard Asset Management, estimated that around 50% to 70% of the impact of the tax plan had been baked into markets before the passage of the Senate's bill.

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"Obviously, for corporates, it's a windfall," Mr. Temple said. "It's unlikely to materially change the growth trajectory, but it is likely to materially change earnings growth," he said.

The WSJ Dollar Index, a measure of the dollar against a basket of 16 currencies, gained 0.3% on Monday, while government bond prices fell, sending the yield on the benchmark 10-year U.S. Treasury note to 2.399% from 2.363% on Friday. Yields move inversely to prices.

A tax overhaul could send bond yields higher, analysts say, in part by expanding the federal budget deficit, which would push the government to sell more bonds.

Gold prices fell 0.3% to $1,278 an ounce on Monday after rising on Friday.

With U.S. stock markets near record highs, some investors say they see greater value in other regions. Jeroen Blokland, a portfolio manager at Dutch asset manager Robeco, said that given economic momentum is already building, the Senate tax bill "is another sign for investors that this rally can continue for quite some time even though valuations are stretched."

Still, those high valuations in the U.S. have led him to favor European and Japanese stocks.

"Japan is doing great and Europe has some catching up to do," Mr. Blokland said.

Elsewhere, the Stoxx Europe 600 climbed 1.3%, lifted by broad gains across sectors.

The British pound rose 0.2% against the dollar amid reports that Britain and the European Union are nearing an agreement that would allow Brexit negotiations to move forward.

Some Asia-Pacific stock markets struggled Monday after pockets of selling last week, notably in technology. Japan's Nikkei Stock Average closed down 0.5% as some tech stocks again came under pressure.

But other markets ended higher. After declining last week, Korea's Kopsi Composite Index added 1.1% and Hong Kong's Hang Seng Index edged up 0.2%.

--Akane Otani contributed to this article.

Write to Christopher Whittall at christopher.whittall@wsj.com

(END) Dow Jones Newswires

December 04, 2017 09:59 ET (14:59 GMT)