Stocks Climb, Dollar Slumps on Trump Tax-Cut Plan: Markets Wrap

Updated on
  • S&P 500 reaches record high, small caps continue rallying
  • Taxes are driving markets ‘but we don’t have a lot of details’

El-Erian Says Trump Tax Plan Part of Design Process

U.S. stocks rose to record levels and headed for an eighth straight quarterly gain, while the dollar slipped as investors assessed the implications of Donald Trump’s tax proposal. Oil slid back after bouncing into bull market territory earlier in the session.

The S&P 500 Index inched up to all-time high and has increased about 3.5 percent over the last three months. The small cap Russell 2000 Index added to its advance after jumping nearly 2 percent on Wednesday following the tax-cut plan announcement. The gauge is up more than 5 percent for the quarter.

Trump’s tax plan is expected to be a boon for businesses and the wealthy, with specific cuts aimed at them. However, it’s difficult to determine precisely what the benefits would amount to since there are few details so far. This puts investors in a quandary, trying to guess which parts of the package the administration is prioritizing. And that’s before the fighting begins in Congress over passing it as a bill.

“U.S. tax policy is key right now but we don’t have a lot of details,” said Mark McCormick, North American head of foreign-exchange strategy at Toronto-Dominion Bank. “The key is we don’t know the trade-off, we don’t know who wins and we don’t know who loses.”

Steven Desanctis of Jefferies and Michael O’Rourke of JonesTrading discuss market reaction to Trump’s tax proposal.

(Source: Bloomberg)

Bloomberg’s dollar spot index headed for a third straight quarterly drop, pushing its loss in 2017 above 8 percent. Gold traded near the lowest since August, on track for the worst month of the year. Oil fell below $51 a barrel, and yields on 10-year Treasuries were flat.

German and French debt was lower. The euro posted its first rise in four days as a regional economic confidence index climbed to a decade-high, giving European Central Bank policy makers more positive signals as they decide on the future of their bond-buying program. But the policy outlook for the world’s biggest economies isn’t the only thing on investors’ minds: end-of-quarter volatility may be near and major markets, including China, will shut next week for a holiday.

Terminal subscribers can read more in our Markets Live blog.

What to watch out for the rest of this week:

  • Japan August industrial production and retail sales are due Friday as is South Korea’s current account balance for August.
  • The euro-area inflation rate may have accelerated a touch to 1.6 percent in September from 1.5 percent but the core will probably remain at 1.2 percent. The data is out on Friday.

And here are the main moves in markets:

Stocks

  • The S&P 500 added 0.1 percent to a record 2,510.07. The small cap Russell 2000 climbed 0.3 percent bringing its increase for the week to more than 2.5 percent, while the Nasdaq 100 Index fell 0.1 percent.
  • The Stoxx Europe 600 Index rose 0.2 percent. 
  • Germany’s DAX Index jumped 0.4 percent to the highest since June. 
  • The MSCI All-Country World Index gained 0.2 percent.

Currencies

  • The Bloomberg Dollar Spot Index dipped 0.2 percent.
  • The euro advanced 0.3 percent to $1.1783, the biggest gain in a week.

Bonds

  • The yield on 10-year Treasuries were unchanged at 2.3103 percent. 
  • Germany’s 10-year yield climbed one basis point to 0.479 percent. 
  • Britain’s 10-year yield fell one basis point to 1.375 percent.

Commodities

  • West Texas Intermediate crude fell 1 percent to $51.59 a barrel, reversing course after touching the highest level since April earlier in the session. 
  • Gold added 0.3 percent to $1,286.54 an ounce. 
  • Copper advanced 1.6 percent to $2.9775 a pound.

— With assistance by Sarah Ponczek, and Cameron Crise

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