The Dow Jones Industrial Average jumped 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 blue-chip index rose 145 points, or 0.6%, to 24377, heading toward a record close. The S&P 500 added 0.3%, and the Nasdaq Composite slipped 0.5% as technology stocks pulled back.
Investors dumped assets that many consider havens, such as 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 earnings growth and help the long U.S. stock rally keep going, investors and analysts say.
"Obviously, for corporates, it's a windfall," said Ronald Temple, head of U.S. equity at Lazard Asset Management. "It's unlikely to materially change the growth trajectory, but it is likely to materially change earnings growth."
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Banks, which some analysts say could be among the biggest beneficiaries of a tax cut, rallied, with the KBW Nasdaq Bank Index of large U.S. lenders recently up 2.5% and on course for its fifth consecutive session of gains.
Shares of small-capitalization companies rose, too, lifting the Russell 2000 by 0.2%. Smaller, more domestically focused companies, which tend to pay a higher effective tax rate than large multinationals, could particularly benefit from a tax overhaul, analysts and investors say.
One sector that lagged behind in Monday's stock rally: technology. Shares of technology companies in the S&P 500 slid 1.3%, posting the steepest daily loss of the broad index's 11 sectors.
While the Republican plan to cut corporate tax rates should lift earnings growth broadly, some analysts have said it could also spur a shift out of stocks that have outperformed this year into relative underperformers. Those analysts believe technology stocks in the S&P 500, which have nearly doubled the broad index's gains this year, are vulnerable to a pullback.
Meanwhile, the WSJ Dollar Index, a measure of the dollar against a basket of 16 currencies, gained 0.3%, while government bond prices fell, sending the yield on the benchmark 10-year U.S. Treasury note to 2.385%, according to Tradeweb, from 2.363% on Friday. Yields rise as prices fall.
A tax overhaul could help boost economic growth, lifting the U.S. dollar. But it also could send bond yields higher, analysts say, in part by expanding the federal budget deficit, which would push the government to sell more bonds.
Other so-called havens retreated. Gold for December delivery fell 0.4% to $1,274.30 an ounce.
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.
The Stoxx Europe 600 climbed 0.9% Monday, lifted by broad gains across sectors.
Some Asia-Pacific stock markets struggled after pockets of selling last week, notably in technology. Japan's Nikkei Stock Average closed down 0.5% as 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%.
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(END) Dow Jones Newswires
December 04, 2017 15:06 ET (20:06 GMT)