Stocks Back in Record Territory Ahead of U.S. Thanksgiving
Tuesday was another record-setting day for U.S. stocks, as the Dow, S&P 500 and Nasdaq reached new milestones ahead of Thanksgiving.
Wall Street Hits New Highs
All of Wall Street’s major indexes finished at records on Tuesday, with the S&P 500 Index briefly trading above 2,600. The large-cap average closed at 2,599.03 for a gain of 0.7%. Ten of 11 sectors contributed to the rally, with information technology adding 1.2%. Healthcare climbed 0.9% and consumer discretioanry shares rose 0.6%.
The only component to record declines was telecommunications services, which is one of only two sectors to report year-over-year declines. Energy is the other, but its losses have been much narrower than telecom’s.
A strong performance in tech sent the Nasdaq Composite Index surging. The tech-laden index rose 1.1% to finish at 6,862.48.
Meanwhile, the Dow Jones Industrial Average added 160.50 points, or 0.7%, to 23,590.83. Dow blue-chips Apple Inc. (AAPL) and Microsoft Corp (MSFT) were the best performers.
Analysts said tech stocks may be getting a boost ahead of the Black Friday shopping frenzy. The holiday season is generally a good time of year for technology products. Adding to this year’s sentiment is an improving economic backdrop and relatively upbeat consumer activity. These factors could lead to a fairly robust Santa Claus rally heading into next month.
The CBOE VIX plunged to multi-week lows even as volatility-linked options prepared to roll over. Wall Street’s favorite measure of investor anxiety fell 8.6% to close at 9.73, its lowest since Nov. 6.
Vol spiked above 14.00 on Nov. 15 in the biggest show of strength since the summer. Despite the latest drop, analysts say markets are preparing to roll the trade over, a move that could incite heavy trading volume in the VIX.
Christmas Tax Cut?
U.S. President Donald Trump told a cabinet meeting on Monday that his administration is going to “give the American people a huge tax cut for Christmas.” The president has been trying desperately to push forward his overhaul of the tax code despite strong opposition from Democrats and members of his own party.
The left-leaning Tax Policy Center doesn’t believe the Trump tax plan is a good idea. Based on an analysis of the proposed plan, the Center concluded that Americans would face higher taxes by year 2027.
Meanwhile, the conservative-leaning Tax Foundation said the proposal would boost wages and create nearly one million new jobs. Combined, this would generate almost $1.3 trillion in federal revenue, which is enough to offset the loss of appropriations caused by the cut.
Trump claims that the new tax code will be a boon to economic growth, thereby negating the loss of revenue. Depending on who you ask, that’s what certainly transpired following President Ronald Reagan’s tax reform. The cuts generated annual economic growth of 3% or more over the next two decades, and that’s including three recessions. The U.S. economy expanded at an average annual rate of 3.4% between the Reagan and Obama presidencies.
The House of Representatives approved a tax provision on Thursday cutting corporate and personal taxes by $1.5 trillion over the next ten years.
Disclaimer: The author owns stocks, index options and cryptocurrencies.
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