Tax-cut euphoria elevates Wall Street to record high


(Reuters) – Wall Street indexes cruised to record highs on Monday, with optimism about a Republican plan to slash corporate taxes fueling gains in banks, while Microsoft and other technology stocks dropped.

Traders work on the floor of the New York Stock Exchange, (NYSE) in New York, U.S., December 1, 2017. REUTERS/Brendan McDermid

Bank of America (BAC.N), JPMorgan Chase (JPM.N), Wells Fargo & Co (WFC.N) and Citigroup (C.N) jumped over 2 percent after the U.S. Senate approved its tax bill on Saturday.

Once the Senate and House of Representatives reconcile their respective versions of the legislation, the resulting bill could cut corporate tax rates to 20 percent from 35 percent.

“It will likely result in increased dividends and share repurchases, and that makes valuations more reasonable and should prolong the rally,” said Tim Ghriskey, chief investment officer of Solaris Group in Bedford Hills, New York.

Investors freed up money to buy banks and other stocks seen benefiting from lower taxes by selling technology stocks, which have become relatively expensive after leading the market’s gains this year.

Microsoft (MSFT.O) lost 2.5 percent, Nvidia (NVDA.O) slumped 4.1 percent and Paypal Holdings (PYPL.O) fell 5 percent, pushing the Nasdaq into negative territory.

Also lifting financial stocks was the broad expectation that the Federal Reserve will increase interest rates in December, which makes bank lending more profitable.

The S&P 500 information technology index .SPRLCT has surged 35 percent in 2017, the market’s top performer. But after falling 3 percent since Nov. 28, investors on Monday became more concerned about the longevity of the sector’s rally.

Traders work on the floor of the New York Stock Exchange shortly after the opening bell in New York, U.S., December 4, 2017. REUTERS/Lucas Jackson

At 2:16 pm ET, the Dow Jones Industrial Average .DJI was up 0.65 percent at 24,389.37 points, while the S&P 500 .SPX had gained 0.37 percent to 2,652.03. Both hit intra-day record highs.

The Nasdaq Composite .IXIC dropped 0.34 percent to 6,824.29.

The S&P 500 has risen about 18 percent this year on strong corporate earnings and solid economic growth as well as expectations that President Donald Trump and the Republican-controlled Congress would cut taxes and corporate regulation.

Media stocks rose after the Financial Times reported that Twenty-first Century Fox (FOXA.O) had resumed talks to potentially sell most of its assets to Walt Disney (DIS.N).

Disney rose 4.9 percent, Fox (FOXA.O) and climbed 3.7 percent.

Comcast (CMCSA.O) jumped 4.7 percent after its chief financial officer provided upbeat subscription forecast for the year.

The stocks helped the consumer discretionary index .SPLRCD gain about 1.5 percent.

CVS Health (CVS.N) shares were down about 5 percent after the company agreed to buy Aetna (AET.N) for $69 billion in the year’s largest corporate acquisition. Aetna shares fell 1 percent.

Advancing issues outnumbered declining ones on the NYSE by a 1.44-to-1 ratio; on Nasdaq, a 1.11-to-1 ratio favored advancers.

Additional reporting by Sruthi Shankar and Rama Venkat Raman in Bengaluru; Editing by Frances Kerry

Our Standards:The Thomson Reuters Trust Principles.

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