Tax overhaul proposal seen as bullish for small-caps
U.S. stocks rose on Wednesday, with the Dow industrials ending a four-day losing streak and the small-cap Russell 2000 notching a record close as President Donald Trump and congressional Republicans touted a sweeping tax overhaul.
What did the main equity benchmarks do?
The Dow Jones Industrial Average rose 56.39 points, or 0.3%, to end at 22,340.71, erasing an earlier loss. The S&P 500 rose 10.2 points, or 0.4%, to close at 2,507.04, less than 0.1% from a record close set last week. The index hit an all-time intraday high of 2,511.75 during the session.
The Nasdaq Composite Index rose 73.10 points, or 1.2%, to 6,453.26.
The Russell 2000 rose 27.95 points, or 1.9%, to close at 1,484.81 -- posting a record close of its own -- (http://www.marketwatch.com/story/russell-2000-hits-record-on-track-for-biggest-one-day-rise-since-june-2017-09-27-1391594)and marking the biggest one-day percentage gain since March 1.
Financials were the strongest sector of the day. The Financial Select Sector SPDR ETF (XLF) rose 1.2% and hit its highest level in nearly a decade (http://www.marketwatch.com/story/financial-etf-surges-to-a-decade-high-as-fed-data-help-boost-treasury-yields-2017-09-27).
What's driving the market?
Republican leaders unveiled a plan to overhaul the U.S. tax code (http://blogs.marketwatch.com/capitolreport/2017/09/27/republicans-roll-out-tax-cut-plans-for-individuals-and-companies-live-blog/) that looks to sharply reduce tax rates on businesses and many individuals. One of the reasons markets have risen throughout 2017 is the prospect of tax reform passing, which is expected to be a tailwind for markets. However, the Republican-controlled Congress was unable to pass health-care reform despite several attempts and versions, and it is unclear how likely it was that tax-reform could be passed.
Also, Federal Reserve Chairwoman Janet Yellen on Tuesday said the central bank won't dawdle with raising interest rates (http://www.marketwatch.com/story/yellen-says-fed-should-be-wary-of-raising-rates-too-gradually-2017-09-26). The news was positive for banks, which typically do better in periods of higher rates, due to the positive impact they have on net interest margins.
However, St. Louis Fed President James Bullard said the economy was likely to remain on a slow-growth track with subdued inflation (http://www.marketwatch.com/story/feds-bullard-sees-no-need-to-raise-interest-rates-anytime-soon-2017-09-27), meaning the Federal Reserve can hold interest rates steady.
Read:Why the Fed trumps North Korea when it comes to financial markets (http://www.marketwatch.com/story/why-the-fed-trumps-north-korea-when-it-comes-to-financial-markets-2017-09-27)
What are market participants saying?
"There's a lot of optimism about tax reform, especially among small-caps, which stand to benefit more if this is enacted," said Michael O'Rourke, chief market strategist at JonesTrading. "There's also been some additional rotation into the parts of the market that have been doing well."
With the Russell's gain on the day, the index is up 5.7% in September, compared with the 1.4% rise of the S&P 500. In the year to date, the S&P 500 is up 12% versus the Russell's 9.4% rise.
Read more:Wilbur Ross says tax reform could boost economy by 1% (http://www.marketwatch.com/story/wilbur-ross-done-right-tax-reform-could-boost-economy-by-1-2017-09-26)
And see:GOP tax plan to allow for top individual rate above 35% (http://www.marketwatch.com/story/republican-tax-plan-to-allow-for-top-individual-rate-above-35-2017-09-26)
Which stocks are in focus?
Nike Inc.(NKE) fell 1.9% after the sneakers giant late Tuesday posted fiscal first-quarter earnings that beat forecasts, but its revenue was slightly below expectations (http://www.marketwatch.com/story/nike-shares-rise-as-company-beats-eps-expectations-2017-09-26). The stock was one of the biggest drags on the Dow.
Shares in Micron Technology Inc.(MU) rose 8.5% a day after the chip maker reported better-than-expected earnings (http://www.marketwatch.com/story/micron-tech-shares-rise-after-earnings-beat-2017-09-26).
See:Micron reassures investors that memory-chip demand remains very high (http://www.marketwatch.com/story/micron-reassures-investors-that-memory-chip-demand-remains-very-high-2017-09-26)
J.P. Morgan Chase & Co. (JPM) was ordered to pay (http://www.marketwatch.com/story/home-contract-signings-tumble-to-near-2-year-low-hit-by-hurricanes-and-tight-supply-2017-09-27) more than $4 billion in damages for mismanaging the estate of a former executive for American Airlines (AAL). Shares of the investment bank rose 1.6%.
Therapix Biosciences Ltd. (TRPX.TV) jumped 6.2% following positive preclinical results (http://www.marketwatch.com/story/therapix-biosciences-shares-surge-6-on-preclinical-results-for-cognitive-impairment-therapy-2017-09-27-8914114) for a potential cognitive-impairment therapy.
What did other assets do?
The ICE U.S. Dollar Index (http://www.marketwatch.com/story/dollar-index-jumps-to-1-month-high-ahead-of-gop-tax-plan-2017-09-27) gained, building on Tuesday's rise (http://www.marketwatch.com/story/dollar-jumps-to-1-month-high-vs-euro-ahead-of-yellen-speech-2017-09-26) (http://www.marketwatch.com/story/gold-at-fresh-lows-for-the-month-as-dollars-win-streak-expands-2017-09-27)
Gold futures (http://www.marketwatch.com/story/gold-at-fresh-lows-for-the-month-as-dollars-win-streak-expands-2017-09-27) lost ground, while oil futures (http://www.marketwatch.com/story/oil-prices-in-holding-pattern-before-us-supply-report-2017-09-27) ended higher as crude supplies unexpectedly declined.
European stocks (http://www.marketwatch.com/story/european-stocks-jump-to-10-week-high-led-by-alstom-after-siemens-deal-2017-09-27) rose, and Asian markets closed mixed (http://www.marketwatch.com/story/asian-markets-unfazed-after-yellen-hints-at-rate-hikes-2017-09-26).
Don't miss:The stock sector that has been 2017's big loser became a big winner this month (http://www.marketwatch.com/story/the-stock-sector-that-has-been-2017s-big-loser-turned-into-a-big-winner-this-month-2017-09-27)
Read:Here's why value stocks are starting to outperform growth (http://www.marketwatch.com/story/heres-why-value-stocks-are-starting-to-outperform-growth-2017-09-26)
What did the data say?
Orders for durable goods rose 1.7% in August, beating forecasts for a 1% rise (http://www.marketwatch.com/story/durable-goods-orders-jump-17-in-august-2017-09-27).
The National Association of Realtors' pending home sales index (http://www.marketwatch.com/story/home-contract-signings-tumble-to-near-2-year-low-hit-by-hurricanes-and-tight-supply-2017-09-27) fell 2.6% to 106.3, the group said Wednesday. That was the lowest reading since January 2016 and put the index 2.6% lower than its level a year ago.
Check out:MarketWatch's Economic Calendar (http://www.marketwatch.com/economy-politics/calendars/economic)
(END) Dow Jones Newswires
September 27, 2017 17:21 ET (21:21 GMT)