Dow hits record on tax cut hopes

The Dow Jones Industrial Average reached a record high on Monday, with banks and retailers surging and technology companies falling as investors realigned their portfolios in hopes of benefiting from expected corporate tax cuts.

THE DOW Jones Industrial Average reached a record high on Monday, with banks and retailers surging and technology companies falling as investors realigned their portfolios in hopes of benefiting from expected corporate tax cuts.

The S& P 500 ended with a loss after hitting an intra-day alltime high earlier in the day, while the technology- heavy Nasdaq dropped 1.05%.

Bank of America, JPMorgan Chase, Wells Fargo & Co. and Citigroup jumped over two percent after the Republican-dominated US Senate approved its tax bill on Saturday. The bill could cut corporate tax rates to 20% from 35%.

“It will likely result in increased dividends and share repurchases, and that makes valuations more reasonable and should prolong the rally,” said Tim Ghriskey, chief investment officer of Solaris Group in Bedford Hills, New York.

Investors freed up money to buy banks, department stores and other stocks seen benefiting from lower taxes by selling technology stocks, which have become relatively expensive after leading the market’s gains this year.

“People are rotating into consumer discretionary and away from technology because of tax advantages from the new bill,” said Michael Matousek, head trader at US Global Investors, Inc. in San Antonio, Texas.

Microsoft lost 3.77%, Nvidia slumped 5.57% and PayPal Holdings fell 5.75%.

Also lifting financial stocks was a broad expectation that the Federal Reserve will increase interest rates in December, which makes bank lending more profitable.

The S& P 500 information technology index has surged 34% in 2017, the market’s top performer. But after it fell three percent since Nov. 28, investors on Monday became more concerned about the longevity of the sector’s rally.

The Dow Jones Industrial Average rose 0.24% to end at 24,290.05 points, while the S&P 500 lost 0.11% to 2,639.44. Earlier in the session, the S&P 500 had touched a record high. The Nasdaq Composite dropped 72.22 points to end at 6,775.37.

The S&P 500 is up 18% in 2017 on strong corporate earnings and solid economic growth, as well as expectations that President Donald Trump and the Republicancontrolled Congress would cut taxes and corporate regulation.

The index is now trading at about 18.20 times expected earnings, its highest level since 2002, according to Thomson Reuters Datastream.

Many department stores pay high tax rates and stand to benefit from the Republican cuts. Macy’s jumped 6.65% and Nordstrom surged 3.87%.

Media stocks rose after the Financial Times reported that Twenty- first Century Fox had resumed talks to potentially sell most of its assets to Walt Disney. Disney added 4.72% and Fox climbed 2.80%.

Advancing issues outnumbered declining ones on the NYSE by 1.03 to one; on Nasdaq, a 1.27- to- one ratio favored decliners. About 7.80 billion shares changed hands on US exchanges, well above the 6.70 billion daily average for the past 20 trading days, according to Thomson Reuters data. —