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Stocks Reach Record Highs On Optimism About Tax Reform - U.S. Commentary


Stocks moved notably higher during trading on Friday following the downturn seen over the course of the previous session. The upward move on the day lifted all three of the major averages to new record closing highs.

The major averages gave back some ground going into the close but remained firmly positive. The Dow rose 143.08 points or 0.6 percent to 24,651.74, the Nasdaq spiked 80.06 points or 1.2 percent to 6,936.58 and the S&P 500 climbed 23.80 points or 0.9 percent to 2,675.81.

For the week, the Dow surged up by 1.3 percent, the Nasdaq jumped by 1.4 percent and the S&P 500 advanced by 0.9 percent.

The strength on Wall Street came as traders expressed optimism about Republican lawmakers passing tax reform legislation.

Senators Marco Rubio, R-Fla., and Bob Corker, R-Tenn., indicated they intend to vote for a revised tax reform bill, suggesting Republicans will have the votes to approve the plan.

A House-Senate conference committee seeking to negotiate differences in the bills passed by the two chambers is expected to release their combined legislation later in the day.

On the U.S. economic front, the Federal Reserve Bank of New York released a report showing growth in New York manufacturing activity slowed by more than anticipated in the month of December.

The New York Fed said its general business conditions index dropped to 18.0 in December from 19.4 in November, although a positive reading still indicates growth in regional manufacturing activity. The index had been expected to dip to 18.6.

Meanwhile, a separate report released by the Federal Reserve showed a smaller than expected increase in industrial production in the month of November.

The Fed said industrial production edged up by 0.2 percent in November after jumping by an upwardly revised 1.2 percent in October.

Economists had expected production to climb by 0.3 percent compared to the 0.9 percent increase originally reported for the previous month.

Semiconductor stocks showed a substantial move to the upside on the day, driving the Philadelphia Semiconductor Index up by 1.5 percent. Industry giant Intel (INTC) helped to lead the sector higher.

Significant strength was also visible among financial stocks, with the Dow Jones Banks Index and the NYSE Arca Broker/Dealer Index climbing by 1.3 percent and 1.5 percent, respectively.

Software, steel, and biotechnology stocks also moved notably higher, while natural gas and railroad stocks moved to the downside.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Friday. Japan's Nikkei 225 Index dropped by 0.6 percent, while Hong Kong's Hang Seng Index slumped by 1.1 percent.

Meanwhile, the major European markets turned in a mixed performance on the day. While the French CAC 40 Index edged down by 0.2 percent, the German DAX Index rose by 0.3 percent and the U.K.'s FTSE 100 Index climbed by 0.6 percent.

In the bond market, treasuries saw modest weakness but closed well off their worst levels of the session. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, inched up by nearly a basis point to 2.355 percent.

Looking Ahead

Economic data may attract attention next week, with traders likely to keep an eye on reports on new and existing home sales, housing starts, durable goods orders and personal income and spending.

Activity in Washington may also impact trading, as Republican lawmakers are hoping to vote on their tax reform bill next week.

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