Stocks Hit Records With GOP Set to Unveil Tax Bill: Markets Wrap

(Bloomberg) -- U.S. stocks rallied to new highs and the dollar strengthened as investors grew increasingly optimistic that Congress would reach a deal to cut corporate taxes.

The S&P 500 Index, Dow Jones Industrial Average and Nasdaq 100 Stock Index closed at records after Republican leaders said they’ll release the final version of the tax overhaul bill Friday evening. A vote is expected next week, with key senators signaling approval. Domestically focused small caps surged to give the Russell 2000 Index its best day since Nov. 16. The dollar gained for the ninth time in 10 sessions as the cuts are expected to bolster the world’s largest economy. Treasury yields were little changed.

Uncertainty surrounding the fate of U.S. tax reform had investors on edge as they look to the end of a stellar year for equities, with money managers showing signs of dialing back their appetite to take risk. That turned on the final session of the week, with the tax overhaul nearing approval days after multiple central banks indicated optimism in their regional economies.

“We’ve got investors heading into year-end trying to figure out where they need to make adjustments in their portfolios with the new tax codes coming into effect and also in general we’re seeing global markets continuing their recovery,” said Chris Gaffney, president of EverBank World Markets in St. Louis.

Aside from the back-and-forth on tax negotiations, a quarterly event known as quadruple witching, when futures and options contracts on indexes and individual shares expire, also added to volatility in the stock market. Volume was 74 percent higher than the daily average in the past 30 days.

Gold climbed with crude, which continued to trade above $57 a barrel. The Stoxx Europe 600 Index fell. South Africa’s rand gained even as volatility soared before the ruling African National Congress meets this weekend to elect a new leader.

The euro posted its third consecutive weekly loss as the ECB remained cautious about the prospects of reaching its inflation goals while reiterating a pledge to keep stimulus in place. The pound dropped and yields on U.K. gilts fell to the lowest since September amid speculation Brexit talks are about to get more difficult. Russia’s ruble fluctuated after the nation’s central bank cut rates more than expected.

Terminal customers can read more in our Markets Live blog.

This is the key event investors are watching:

• South Africa’s ruling African National Congress meets this weekend to elect a leader to replace Jacob Zuma as party president. The outcome may be known by Sunday.

And these are the main moves in markets:

Stocks

• The S&P 500 rose 0.9 percent to 2,675.63 as of 4 p.m. in New York.
• The Dow gained 0.6 percent, while the Nasdaq 100 added 1.2 percent and Nasdaq Composite rose 1.2 percent. The Russell 2000 jumped 1.6 percent, the most since Nov. 16.
• The Stoxx Europe 600 Index tumbled 0.2 percent. 
• The MSCI Asia Pacific Index declined 0.6 percent.

Currencies

• The Bloomberg Dollar Spot Index increased 0.4 percent. 
• The euro slid 0.2 percent to $1.1756. 
• The British pound fell 0.8 percent to $1.3319. 
• South Africa’s rand climbed 2.5 percent to 13.1764 per dollar, the strongest in three months.

Bonds

• The yield on 10-year Treasuries were little changed at 2.3476 percent. 
• Germany’s 10-year yield declined two basis points to 0.301 percent. 
• Britain’s 10-year yield fell two basis points to 1.15 percent, the lowest in three months.

Commodities

• West Texas Intermediate crude increased 0.4 percent to $57.29 a barrel. 
• Gold rose 0.3 percent to $1,256.74 an ounce. 
• Copper gained 2 percent to $3.11 a pound.

--With assistance from Adam Haigh Robert Brand and Sarah Ponczek

To contact the reporter on this story: Eric J. Weiner in New York at eweiner12@bloomberg.net.

To contact the editor responsible for this story: Jeremy Herron at jherron8@bloomberg.net.

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