Market Analysis

Beyond the Numbers

Senate Passage Of Tax Reform Bill May Lead To Jump On Wall Street
12/4/2017 8:35 AM

The major U.S. index futures are pointing to a higher opening on Monday after Senate Republicans narrowly approved a massive tax reform bill early Saturday morning.

The Senate voted 51 to 49 in favor of the bill known as the Tax Cuts and Jobs Act, with the vote largely coming down along party lines.

Senator Bob Corker, R-Tenn., was the only Republican to vote against the bill amid concerns about the legislation's impact on the budget deficit.

“With the great vote on Cutting Taxes, this could be a big day for the Stock Market - and YOU!” President Donald Trump said in a post on Twitter.

With the vote to approve the bill, lawmakers from the Senate and House will need to go to conference to work out differences in the bills passed by the two chambers.

After falling sharply in late morning trading, stocks climbed well off their worst levels of the day but still ended the day modestly lower. The Dow and the S&P 500 pulled back off the record closing highs set in the previous session.

The major averages all finished the session below the unchanged line. The Dow slipped 40.76 points or 0.2 percent to 24,231.59, the Nasdaq fell 26.39 points or 0.4 percent to 6,847.59 and the S&P 500 dipped 5.36 points or 0.2 percent to 2,642.22.

For the week, the major averages turned in a mixed performance. While the Nasdaq slid by 0.6 percent, the Dow surged up by 2.9 percent and the S&P 500 jumped by 1.5 percent.

The late-morning sell-off on Wall Street came on news that former National Security Adviser Michael Flynn has agreed to cooperate with prosecutors in the investigation of Russian meddling in last year's election.

Flynn pleaded guilty to lying to the FBI about conversations with the Russian ambassador, signaling that he had reached an agreement with Special Counsel Robert Mueller's team.

A report from ABC News said Flynn is prepared to testify that then-candidate Donald Trump directed him to make contact with the Russians.

However, stocks regained ground as Senate Majority Leader Mitch McConnell, R-Ken., declared that Republican leaders were successful in winning over enough reluctant lawmakers to pass their tax reform bill.

The news out of Washington overshadowed a report from the Institute for Supply Management showing a modest slowdown in the pace of growth in manufacturing activity in the month of November.

The ISM said its purchasing managers index dipped to 58.2 in November from 58.7 in October, although a positive reading still indicates growth in manufacturing activity. Economists had expected the index to edge down to 58.4.

Timothy Fiore, Chair of the ISM Manufacturing Business Survey Committee, said faster growth in new orders and production was offset by supplier delivery improvement and declines in raw material inventory.

A separate report from the Commerce Department showed a much bigger than expected increase in construction spending in the month of October.

Airline stocks showed a significant move to the downside on the day, dragging the NYSE Arca Airline Index down by 1.5 percent. The index ended the previous session at its best closing level in four months.

Hawaiian Airlines parent Hawaiian Holdings (HA) led the sector lower, while Alaska Air (ALK), Allegiant Travel (ALGT) and American Airlines (AAL) also posted notable losses.

Extending a recent downward move, semiconductor stocks also came under pressure on the day. The Philadelphia Semiconductor Index fell by 1.1 percent to its lowest closing level in a month.

On the other hand, oil service stocks moved substantially higher, extending a recent upward move. After closing higher in the three previous sessions, the Philadelphia Oil Service Index surged up by 3.3 percent. The strength among oil service stocks came amid a notable increase by the price of crude oil.

Commodity, Currency Markets

Crude oil futures are falling $0.47 to $57.89 a barrel after jumping $0.96 to $58.36 a barrel last Friday. Meanwhile, an ounce of gold is trading at $1,277.20, down $5.10 from the previous session’s close of $1,282.30. On Friday, gold rose $5.60.

On the currency front, the U.S. dollar is trading at 112.90 yen compared to the 112.17 yen it fetched at the close of New York trading on Friday. Against the euro, the dollar is valued at $1.1860 compared to last Friday’s $1.1896.


Asian stocks finished mixed on Monday after U.S. Senate Republicans narrowly passed a bill to overhaul the U.S. tax system and President Donald Trump said on Twitter he never asked former FBI director James Comey to stop investigating former National Security Adviser Michael Flynn.

China's Shanghai Composite Index dipped 7.25 points or 0.2 percent to 3,310.37, while Hong Kong's Hang Seng Index rose 64.04 points or 0.2 percent to 29,138.28.

Japanese shares fell in cautious trade, dragged down by technology stocks. The Nikkei 225 Index slid 111.87 points or 0.5 percent to finish at 22,707.16 and the broader Topix Index closed 0.5 percent lower at 1,786.87.

Kobe Steel, Panasonic, Advantest and Fanuc lost 1-2 percent, while Canon edged up 0.2 percent and Sony added 1.4 percent. Retailers J. Front Retailing and Takashimaya gained around 1.7 percent each after reporting strong monthly sales in November.

SoftBank lost 1.1 percent after saying it has paid a total of 1.7 billion yen, or $15.2 million, in back taxes after underreporting its income by 6.2 billion yen over the three years through March of 2015.

Japanese consumer confidence improved as expected in November to the highest level in more than four years, survey data from the Cabinet Office showed today. The consumer confidence index climbed to 44.9 from 44.5 in the previous month.

Australian shares recovered from early losses to end roughly flat as gains in the material sector offset declines among financials. The benchmark S&P/ASX 200 Index edged down 4.17 points or 0.1 percent to finish at 5,985.60, while the broader All Ordinaries Index ended about 5 points lower at 6,070.60.

Strong base metal prices helped lift mining stocks, with BHP Billiton, Fortescue Metals Group and South32 closing up between 1.5 percent and 1.6 percent. Rio Tinto advanced 1.2 percent after appointing Simon Thompson as its new chairman.

Banks ANZ and Westpac fell around 1 percent amid the uncertainty surrounding the royal commission inquiry. Energy stocks posted modest gains after crude oil prices jumped on Friday.

Meanwhile, G8 Education shares plunged 23 percent after the childcare center operator slashed its earnings forecast for the 2017 financial year.


European stocks have rallied on Monday as the U.S. Senate approved a bill to overhaul the tax system and investors expressed optimism about progress in Britain's Brexit talks.

While the U.K.’s FTSE 100 Index has risen by 0.5 percent, the French CAC 40 Index and the German DAX Index are up by 1.2 percent and 1.6 percent, respectively.

Automakers Volkswagen, BMW, Daimler, Peugeot and Renault have moved higher on hopes that large Republican-backed tax cuts will deliver a modest boost to the U.S. economy in the next two years.

Mining giant Rio Tinto has also advanced after appointing Simon Thompson as its new chairman.

Airbus shares have rallied on news the aerospace giant estimates that it can deliver more than 700 aircraft to customers in 2017.

Denmark's insurer Tryg has also jumped after it agreed to buy unlisted competitor Alka Forsikring for $1.31 billion.

Meanwhile, Dialog Semiconductor shares have fallen after the German firm confirmed that it continues to supply Apple (AAPL) with customized power management integrated circuits across a range of platforms without material change to its ongoing business relationship.

U.S. Economic Reports

At 10 am ET, the Commerce Department is scheduled to release its report on new orders for manufactured goods in the month of October. Factory orders are expected to climb by 0.6 percent in October after jumping by 1.4 percent in September.
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