Record highs on Wall St, driven by tax bill hopes, M&A flurry
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NEW YORK, Dec 18 — The major US stock indexes hit record highs in a broad rally today as the long-awaited bill to lower taxes looked set to be passed into law and buoyed by about US$11 billion in corporate deal-making.
More US Republicans Senators yesterday said they expected Congress to pass the tax bill this week, with a Senate vote set for tomorrow and President Donald Trump expected to sign the bill into law by the end of the week.
US stocks have enjoyed a near year-long rally, of late powered by increasing expectations of the promised tax overhaul, which aims to lower corporate taxes to 21 per cent from 35 per cent, coming to fruition.
The benchmark S&P 500 has gained about 20 per cent so far in 2017, set for its best year since 2013, as investors bet that lower taxes could boost corporate profits and trigger share buybacks and higher dividend payouts.
“The market is going to continue its rally based on the belief that we’re going to see the Congress pass tax reform,” said Robert Pavlik, Chief Investment Strategist at SlateStone Wealth in New York.
“People are a bit weary about how long the rally will last, but earnings continue to grow, (the) tax package should help and the economy is doing well,” Pavlik said. “I’m very positive about the overall market.”
At 9.35am ET (1435 GMT), the Dow Jones Industrial Average was up 188.49 points, or 0.76 per cent, at 24,840.23 and the S&P 500 was up 17.14 points, or 0.64 per cent, at 2,692.95.
The Nasdaq Composite was up 47.53 points, or 0.69 per cent, at 6,984.12.
Besides the bluechip Dow, benchmark S&P and the Nasdaq, the Nasdaq 100, S&P 100 also hit all-time highs.
All the major 11 S&P sectors were higher, with the financial index gaining the most at 1.09 per cent. Banks are seen as one of the biggest beneficiaries of tax reform.
Another expected outcome of lower taxes is likely to be cash repatriation, which market analysts say could boost merger and acquisition activity. Today, investors were treated to a flood of deals.
Shares of Amplify Snack soared 70 per cent to US$11.94 after Hershey said it would buy the SkinnyPop popcorn maker in a US$1.6 billion deal. Hershey dipped 0.64 per cent.
Synder’s-Lance was up about 7 per cent at US$49.94 after Campbell Soup said it would buy the Pretzels and Cape Cod chips maker for US$4.87 billion. Campbell shares rose 1.33 per cent.
Casino operator Penn National Gaming said it would buy Pinnacle Entertainment in a US$2.8 billion deal. Penn National inched up 0.7 per cent and Pinnacle rose 1.3 per cent.
Among the decliners was CSX, which slipped about 1 per cent after the railroad operator said Chief Executive Hunter Harrison died amid a turnaround he started.
Advancing issues outnumbered decliners on the NYSE by 2,264 to 400. On the Nasdaq, 2,056 issues rose and 421 fell. — Reuters