Wall Street’s three major indexes have climbed to record closing highs, as a long-awaited bill to cut corporate tax rates looked like it would win enough support from lawmakers to pass.
US congressional Republicans were expected to release final details of their plan late on Friday, with decisive votes planned for next week after lawmakers who had previously criticised the bill started to voice their support.
Republican Senator Bob Corker joined Senator Marco Rubio in signaling support in the late afternoon. Rubio had criticised the initial proposal, saying it did not give enough tax relief to working families, while Corker, had expressed concerned about the bill’s impact on the federal deficit.
The bill is expected to drop corporate tax rates to 21 per cent from 35 per cent and some investors are betting that companies will put most of the savings toward a boost in shareholder payouts.
‘It’s meaningful in terms of its impact on shareholders. You’re going to see an increase in stock buybacks, maybe some dividend payouts,’ said David Joy, chief market strategist at Ameriprise Financial in Boston.
‘By and large there’s a high correlation between higher equity prices and consumer confidence and consumer spending. Some translates into rising consumer sentiment and better feelings about job security,’ he said.
However, as the tax package has evolved, it has tilted increasingly toward benefiting businesses and the wealthy, a trend that concerned some lawmakers.
The S&P was up one per cent after Corker announced his support, but couldn’t sustain those levels as investors awaited tax bill details, according to Brian Battle, director of trading at Performance Trust Capital Partners in Chicago.
‘We don’t know how stimulative it will actually be,’ said Battle. ‘There shouldn’t be any surprises. The stuff they were apart on seems manageable.’
The Dow Jones Industrial Average rose 143.08 points, or 0.58 per cent, to 24,651.74, the S&P 500 gained 23.8 points, or 0.90 per cent, to 2,675.81 and the Nasdaq Composite added 80.06 points, or 1.17 per cent, to 6,936.58.
The S&P 500 and the Dow closed higher for the fourth week in a row, while the Nasdaq saw its first weekly gain out of three.
The S&P’s Energy index was the only one of its 11 majors in the red with a 0.03-percent dip. Technology and Healthcare indexes led the advance with 1.24 and 1.17 percent gains, respectively.