Stocks post gains on hopes for lower US corporate taxes
Stocks were hanging onto gains Monday afternoon on expectations that lower taxes will help corporate profits pile up even higher.
Congress moved closer to overhauling the U.S. tax system over the weekend, after the Senate narrowly approved its package of cuts.
Lower corporate tax rates would help boost profits for companies, which have already been reporting resurgent gains this year thanks to a global economy that finally seems to be improving in sync. And if profits do indeed accelerate further, it would help allay worries that the record-high stock market has climbed too far, too quickly.
KEEPING SCORE: Major indexes were still mostly higher in afternoon trading after giving up some of their earlier gains. The Standard & Poor’s 500 index was up 6 points, or 0.2 percent, to 2,648 as of 2:50 p.m. Eastern time. It had been up as much as 0.9 percent in the morning.
The Dow Jones industrial average climbed 147 points, or 0.6 percent, to 24,379. The Nasdaq composite lagged the market and was down 43 points, or 0.6 percent, to 6,804. More stocks rose than fell on the New York Stock Exchange.
TAX BENEFICIARIES: Smaller companies look to be some of the biggest winners from the tax overhaul because they generally pay higher rates than their bigger rivals. An S&P index of small-company stocks was up 0.4 percent, twice the gain of the S&P 500, which tracks large U.S. companies.
Other likely winners include telecoms, which pay some of the highest effective tax rates among the big companies in the S&P 500. Telecommunication stocks jumped 2.1 percent for the biggest gain of the 11 sectors in the index.
Analysts also expect banks to be winners from the tax overhaul, and financial stocks in the S&P 500 climbed 1.8 percent.
Technology companies, meanwhile, will likely get less of a boost. They already were typically paying the lowest effective tax rates of the 11 sectors in the S&P 500, analysts said.
Tech stocks in the index were down 1.5 percent, lagging far behind the rest of the market. It’s a very different position for the sector, which has led the market for most of this year and has nearly doubled the performance of the S&P 500.
HEALTH DEAL: CVS Health fell after offering $69 billion to buy insurer Aetna, a combination that would touch almost every facet of patients’ health care needs. CVS fell $3.13 or 4.2 percent, to $72.04, and Aetna dipped $1.75, or 1 percent, to $179.53.
BUSY WEEK: Congress still has a packed schedule, even after the Senate pushed through its tax-overhaul vote a couple hours after midnight on Saturday morning. Washington faces a deadline on Friday to avert a shutdown of the government.
Friday is also the day when the government will release its monthly jobs report. That will be one of the last pieces of economic data that will arrive before the Federal Reserve meets next week to vote on interest rates. Many economists expect the central bank to approve the third rate increase of the year.
And hanging over everything in Washington is the investigation that continues into Russia’s involvement with last year’s presidential election. President Donald Trump’s former national security adviser has pled guilty to lying to the FBI and has agreed to cooperate with the probe, which could threaten the agenda set by Trump and his fellow Republicans in control of Congress.
MARKETS ABROAD: European markets rallied after the chief of the European Union said he was encouraged by last-minute progress in talks for the United Kingdom to leave the group.
France’s CAC 40 jumped 1.4 percent, and Germany’s DAX surged 1.5 percent. The FTSE 100 in London rose 0.5 percent.
Asian markets were mixed. South Korea’s Kospi rose 1.1 percent, the Hang Seng in Hong Kong gained 0.2 percent and Japan’s Nikkei 225 index fell 0.5 percent.
YIELDS: Treasury yields rose as prices for government bonds fell. The yield on the 10-year Treasury note climbed to 2.38 percent from 2.37 percent late Friday.
The two-year yield rose to 1.81 percent from 1.78 percent and reached its highest level since autumn 2008, when the financial crisis was in full effect. The 30-year yield climbed to 2.79 percent from 2.76 percent.