Tuesday, November 28, 2017

Markets advance as Senate takes a step towards passing the tax bill

Dow shot up 255 (closing near the highs), advancers over decliners 2-1 & NAZ went up 33.  The MLP index retreated 1+ to the 254s (yet another low) & the REIT index fell 1+ to the 358s.  Junk bond funds crawled higher & Treasuries were a tad lower.  Oil slid below 58 on worries about OPEC's meeting later this week & gold lost 1 to 1293.

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Stock indices edged higher to records after Federal Reserve chair nominee Jerome Powell's comments on interest rate hikes & deregulation fired up financial stocks.  Leading bank stocks climbed about 2%, setting up the S&P financial index .SPSY for its biggest percentage gain in more than 2 weeks.  Powell, in his confirmation hearing before the Senate Banking Committee, positioned himself as an heir to the central bank policies of current chair Janet Yellen & her predecessor Ben Bernanke.  He also defended the need to potentially lighten regulation on the financial sector.  Data pointing to better-than-expected consumer confidence also helped lift sentiment.  The Conference Board’s consumer confidence index for Nov jumped to its highest in nearly 17 years.  The index rose to 129.5 in Nov, compared with an increase to 124 expected.  The data follows a report on yesterday that showed sales of new US single-family homes hit a 10-year high in October & robust Cyber Monday & Black Friday shopping that pointed to a strong holiday shopping season.

Wall Street at records as financials rally on Powell comments

Cyber Monday provided the latest piece of evidence supporting Americans' unwavering confidence in the economy, with $6.59B in sales, over $1B more than was spent on Cyber Monday in 2016, according to Adobe.  The holiday shopping season so far (Nov 1-27) drove a total of $50B in online revenue, a 16.8% increase & Adobe predicts this will be the first-ever holiday season to break $100B in online sales.  Overall web traffic to retail sites increased 11.9% on Cyber Monday, while the number of shoppers searching for deals on their mobile devices surged, setting a new record & representing 47.4% of visits.  Shoppers were able to score the best deals on toys, TVs & computers; discounted at 18.8%, 21.2%, & 14.7%, respectively.

Cyber Monday 2017: The biggest online shopping day in history

Hours before a key committee vote today, Senate GOP leaders were still trying to persuade reluctant senators to support a sweeping tax package that would stand as the biggest legislative accomplishment of Pres Trump's first year in office.  Trump was headed to the Capitol ahead of the vote to make a personal pitch at a Senate Rep luncheon.  The Senate Budget Committee was scheduled to vote on the package shortly, though 2 Rep senators said they might oppose it.  Sen. Ron Johnson says the package doesn't cut taxes enough for business owners who report business profits on their individual tax returns & Sen. Bob Corker said he is concerned that the package will add to the federal gov's $20T debt.  If Corker & Johnson side with the committee Dems, it will be a major embarrassment for GOP leaders but it wouldn't necessarily kill the bill.  The committee could still send the tax bill to the Senate floor, but it would go with an unfavorable recommendation.  More importantly, it would force Senate Rep leaders to change the bill to pick up more support.  Reps hold a razor-thin 52-48 majority in the Senate, so they can afford to lose only 2 votes & at least 4 other senators have raised concerns.  This morning, Senate GOP leaders held an event with small business representatives who, one by one, professed support for the tax package.  "It will be a great Christmas gift for this country and for our nation's small businesses," said Matthew Shay, pres of the National Retail Federation.  After the event, Sen. John Cornyn, #2 Rep in the Senate, said he was optimistic about today's vote in the Budget Committee.  GOP leaders hope to pass the bill out of the Senate this week.  If they succeed, the bill would have to be reconciled with the tax package passed by the House before Thanksgiving.  Senate Reps indicated they still had a way to go to secure the votes.  "We're making progress, minute by minute, hour by hour, day by day. But we're not there yet," Cornyn said yesterday.  The overall tax package blends a sharp reduction in top corp & business tax rates with more modest relief for individuals.  To mollify deficit hawks, Senate GOP leaders are considering a "trigger" that would automatically increase taxes if the legislation fails to generate as much revenue as they expect.  A new estimate by congressional analysts says the Senate tax bill would add $1.4T to the budget deficit over the next decade.  But GOP leaders dispute the projection, saying tax cuts will spur economic growth, reducing the hit on the deficit.

GOP leaders press reluctant colleagues ahead of tax vote

The Senate Budget Committee just approved the Rep tax bill, a crucial procedural step toward a vote in the full chamber later this week.  With the party-line 12-11 vote to advance the plan, Reps overcame one possible roadblock in their push to chop tax rates for businesses & individuals by the end of the year.  2 GOP members of the panel had separate concerns that threatened to upend the bill's momentum.  Sen. Corker, wants a "trigger: to raise revenue should the bill's economic growth effects not go far enough to make up for the nearly $1.5T in estimated tax cuts over 10 years.  The senator had fears about expanding budget deficits.  Corker backed the proposal after reportedly reaching the outline of a deal for such a backstop.  Meanwhile, Sen. Johnson sought to further reduce the tax burden on pass-through businesses, which pay individual rates.  He argued that those businesses got worse treatment under the plan than corps, which would see their tax rate chopped to 20% from 35%.  Both senators ended up voting to advance the bill.  Rep Senate leaders want to pass the plan later this week.  As it holds 52 seats, the GOP can lose only 2 votes & still approve the bill under special budget rules, assuming all Dems & independents oppose it.

Senate committee advances GOP tax bill, moving closer to floor vote 

Stocks bounced back after North Korea had another missile test.  Then the vote in the Senate helped brought back stock buyers.  They took the Dow up 200 late in the day.  But the drama is hardly over, just beginning.  Those guys just went up 1 step on a tall ladder.  Holiday sales looked good & favorable economic data increased demand for stocks.  The bulls want to take the Dow up to 24K (needing less than 200), then 25K.

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