NEW YORK (AFP) - Wall Street cheered the House of Representative’s passage of the Republican tax cut plan on Thursday (Nov 16), pushing US stocks higher and lifting the Nasdaq to a fresh record.
Adding to the positive momentum from Capitol Hill, Dow members Wal-Mart Stores and Cisco Systems both rallied after reporting solid earnings.
The tech-rich Nasdaq Composite Index jumped 1.3 per cent to end the session at 6,793.29, eclipsing its Nov 8 record by about four points.
The Dow Jones Industrial Average jumped 0.8 per cent to 23,458.36, while the broad-based S&P 500 gained 0.8 per cent to 2,585.64.
After months of anticipation, the Lower House of Congress approved President Donald Trump’s landmark tax overhaul 227 to 205, with all Democrats and a handful of Republicans voting against.
Investors applauded the progress and overlooked the myriad controversies that have split Senate Republicans and are expected to result in a much thornier debate in the Upper Chamber.
“Tax legislation clearly has momentum, but with political obstacles, budgetary constraints, and the gap between the House and Senate bills, enactment is more likely in early 2018 than year-end,” said Mickey Levey of Berenberg Capital Markets.
And Phil Davis of PSW Investments, warned that, “Investors are jumping the gun.”
“The risk is the Senate,” Davis said. “If they lose one more person (in the Senate), this thing is dead.”
Wal-Mart surged 10.9 per cent after boosting its full-year profit forecast, as US comparable stores rose 2.7 per cent, propelled in part by higher sales in hurricane-affected regions.
Cisco, another Dow component, rose 5.2 per cent after reporting that quarterly earnings rose 3.1 per cent to US$2.4 billion (S$3.2 billion), besting analyst expectations.
Procter & Gamble, another blue-chip company, advanced 1.1 per cent after Trian Fund Management’s Nelson Peltz claimed victory in a contested battle for a board seat. P&G refused to concede, however, saying the results of the shareholder vote were still preliminary and subject to review.
Telecommunications shares were strong, with AT&T gaining 2.1 per cent, Verizon 1.5 per cent and T-Mobile US 5.5 per cent.
Drug-related shares were another big winner. Celgene gained 3 per cent, Express Scripts 4 per cent and Walgreens Boots Alliance 1.6 per cent.
But Best Buy slid 3.6 per cent after revenues and comparable store sales rose less than expected and the electronics retailer offered a disappointing outlook for the holiday shopping season.