Thursday, November 30, 2017

Markets soar after McCain indicates he will vote for tax plan

Dow surged 331, advancers over decliners 3-2 & NAZ went up 49.  The MLP index shot up over 10 to the 262s on optimism over oil & the REIT index was flat in the 358s.  Junk bond funds drifted lower & Treasuries retreated.  Oil was off pennies in the 57s after OPEC agreed to extend production cuts (more below) & gold dropped 8 to 1274 while stocks rallied

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Stocks gained after John McCain backed the Senate tax bill & the biggest technology stocks rebounded from their worst selloff in more than a year.  The Dow extended its climb past 24K after the statement of support from the Arizona Rep as the measure headed for a marathon debate, while the S&P 500 was set for its longest monthly winning streak since 2007.  Treasuries extended their slide, with the 10-year yield breaking above 2.4%.  The € & £ strengthened as Brexit negotiators moved closer to a divorce agreement.  An up-or-down vote on the Senate tax bill could happen before the end of this week.  While McCain's support helped bring the measure one step closer to passing, Rep Senator Susan Collins said it “would be very difficult” for her to support the proposal in its current form.  The party can only afford to lose 2 of its 52 members to pass the bill without Dems.  Senators Bob Corker, Jeff Flake, James Lankford & Ron Johnson are all seen as potential “no” votes.  Data showed US consumer spending settled back in Oct to a still-decent pace after the biggest increase since 2009, as a post-storm surge in auto sales cooled.  Incomes remained robust & inflation showed progress toward the Federal Reserve's goal.  Treasuries sank, driving the benchmark 10-year yield to the highest in a month.  

Dow Surges More Than 300 Points

OPEC & allies outside the group agreed to maintain oil production cuts until the end of 2018, extending their campaign to wrest back control of the global market from America's shale industry.  After a day of talks in Vienna, the decision showed the strength of the unprecedented alliance between the world's top 2 oil producers, Saudi Arabia & Russia, & confounded analysts who predicted Moscow would be reluctant to keep going.  The deal was even beefed up through the inclusion of Nigeria & Libya, 2 members of OPEC originally exempted from the curbs.  “We are united, shoulder to shoulder,” Saudi Arabian Energy Minister Khalid Al-Falih said sitting next to his Russian counterpart Alexander Novak after the meeting.  “We are completely aligned.”  Since the pact started a year ago, global inventories have fallen & prices risen by more than $20 a barrel, but in rare display of unanimity at an OPEC meeting ministers agreed the job wasn't yet complete.  By keeping the 1.8M barrels a day of cuts in place for a further 9 months, the oil producers aim to return stockpiles to their 5-year average without overheating the market & eliciting a new flood of shale oil.   Benchmark Brent crude rose 0.7% to $63.57 a barrel.

OPEC Agrees to Extend Oil Cuts Until the End of 2018

A Rep tax reform plan passed in the House & now the Senate is debating their version of GOP tax reform.  Some Senators such as Sen. Ron Johnson have raised concerns that the tax reform plan benefits big corps too much & doesn't do enough for small businesses in America.  Small Business Association (SBA) administrator Linda McMahon weighed in on the tax reform debate, saying, “I’ve talked to more than 450 businesses and without fail every one of those businesses have said, “look, let me have tax cuts, those tax cuts will be plowed right back into my business, they’re not talking about percentages, they’re not talking about where things are going, what they want are those tax cuts.”  John Arensmeyer, founder of the organization Small Business Majority said that he would vote against the tax plan reform in its current form.  “This isn’t about partisan politics, it’s about doing what is best for small businesses and right now the way the law is written is that the vast majority of the benefits are going to go to hedge funds, real estate investment trusts (REITs), and others at the very top end of the income spectrum while very little is going to go to Main Street small businesses,” he said.  But McMahon cautioned that the tax plan is still being developed.  “I don’t know that that will be accurate Stuart because we don’t really know what the bill is going to be yet, I think it’s going through the right process, the amendments are being put forth, we’re voting, we’re actually debating this and this is the way the process is supposed to work.”

Tax cuts will be ‘plowed right back into’ small business: SBA’s Linda McMahon

Stocks are flying higher than ever with the scent of tax reform in the air!!  However the main problem is the possibility of rejection by the senate.  The bulls are assuming that will be worked out in DC.  A lot of drama lies ahead in the new month starting tomorrow.  This market keeps surging with the Dow up nearly a staggering 6K since the election.  Optimists have 25K for the Dow in sight, only 700 away (with their fingers crossed).  Hang on for a bumpy ride!

Dow Jones Industrials


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