Wall St. climbs on financials boost, tax plan hopes
Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., September 27, 2017. REUTERS/Brendan McDermid
NEW YORK: U.S. stocks rose on Wednesday, powered by gains in financial shares as expectations for a December rate hike grew and hopes President Donald Trump's administration may be making progress on a new tax plan.New orders for U.S.-made capital goods increased more than expected in August and shipments maintained their upward trend, pointing to underlying strength in the economy.The data, coupled with comments from Fed Chair Janet Yellen on Tuesday boosted anticipation the Federal Reserve would raise U.S. interest rates in December, lifting yields on U.S. Treasuries, which in turn pushed financials up 1.57 percent."The takeaway is they are going to continue raising rates gradually," said Art Hogan, chief market strategist at Wunderlich Securities in New York."That means December is still on the table and that is trying to be priced in, that means you have a yield on the 10-year (benchmark U.S. Treasury note) that is probably going to be closer to 2.5 percent than it is to 2.25 percent and that is good for financials."Trump proposed the biggest tax overhaul in three decades, but offered scant details about how to pay for the cuts without dramatically driving up federal deficits.
If passed, the plan would be Trump's first significant legislative win since taking office in January."It is better than the one-page document we got but it is clearly not an omnibus tax plan," said Hogan.The Russell 2000 index of smallcap stocks rose 1.96 percent and was on track for its best day since early March. Smallcap names are likely to be the biggest beneficiaries of a tax cut.Traders now see about a 78 percent chance of a December rate hike, compared with roughly 73 percent a week ago, according to CME Group's FedWatch tool.
Bank of America rose 3.02 percent and Goldman Sachs gained 2.18 percent as the biggest boost to the Dow.The Dow Jones Industrial Average rose 64.12 points, or 0.29 percent, to 22,348.44, the S&P 500 gained 11.18 points, or 0.45 percent, to 2,508.02 and the Nasdaq Composite added 79.06 points, or 1.24 percent, to 6,459.23.Interest-rate-sensitive and dividend-paying sectors declined. The consumer staples index fell 0.9 percent while utilities dropped 1.2 percent and real estate lost 0.9 percent.Also serving to cap gains on the Dow and S&P were Nike shares, which declined 3.4 percent after the company posted its slowest quarterly sales growth in nearly seven years and said it expected a further drop in revenue from North America.Advancing issues outnumbered declining ones on the NYSE by a 1.28-to-1 ratio; on Nasdaq, a 2.93-to-1 ratio favored advancers.(Reporting by Chuck Mikolajczak; Editing by James Dalgleish)