Wall Street higher as investors await tax-cut benefits
By Sruthi Shankar
Wall Street’s main indexes rose on Thursday as investors expected lower corporate tax rates to encourage companies to spend their additional capital on dividends, new projects and wage hikes.
The U.S. Congress approved a $1.5-trillion tax cut bill this week, with the highlight being a corporate tax cut to 21 percent from 35 percent.
A number of companies, including AT&T <T.N>, Wells Fargo <WFC.N> and Boeing <BA.N>, have promised higher pay for workers or more investment in training. Some others have forecast a rise in earnings due to tax cuts.
“The impact is still a work-in-progress, tax cuts are believed to add to earnings. But the unknowns are to what extent the company behavior changes in terms of capex policy, buybacks and wage increases,” said Terry Sandven, chief equity strategist at U.S. Bank Wealth Management in Minneapolis.
At 10:51 a.m. ET (1551 GMT), the Dow Jones Industrial Average <.DJI> was up 104.5 points, or 0.42 percent, at 24,831.15 and the S&P 500 <.SPX> was up 8.22 points, or 0.31 percent, at 2,687.47. The Nasdaq Composite <.IXIC> was up 8.00 points, or 0.11 percent, at 6,968.96.
Financial <.SPSY> stocks led the gains on the S&P 500.
JPMorgan <JPM.N> rose 1.6 percent, Wells Fargo <WFC.N> about 2 percent and Goldman Sachs <GS.N> 2.6 percent. The bank stocks were the biggest drivers on the S&P and the Dow.
The gains also came after latest gross domestic product data showed the U.S. economy grew at its fastest pace in more than two years in the third quarter.
Another economic indicator showed a jump in the number of Americans filing for unemployment benefits last week, but the underlying trend in jobless claims remained consistent with a tightening labor market.
“You’ve got an improving economy that bodes well for loan growth along with a rising interest rate environment, and a modest regulatory relief, which makes financial stocks favorable,” said Sandven.
Accenture <ACN.N> shares rose 4.4 percent to hit a record high at $158.40 after the consulting and outsourcing services provider reported strong quarterly profit, driven by digital and cloud services business.
Shares of Bed Bath and Beyond <BBBY.O> fell about 13 percent after the company said comparable sales fell 0.3 percent in the third quarter.
Chevron <CVX.N> shares jumped more than 3 percent to a record high of $124.60 after broker Cowen & Co raised price target by nearly a third to $160 on expectations of higher cash flow and improving Permian metrics. Advancing issues outnumbered decliners on the NYSE by 1,837 to 937. On the Nasdaq, 1,724 issues rose and 982 fell.