Stocks rise; small firms fare best
NEW YORK — U.S. stocks climbed Wednesday as shares of smaller companies soared after a report that showed business investment climbed in August. Investors also hoped stocks will benefit from tax cuts proposed by President Donald Trump and congressional Republicans.
The Standard & Poor’s 500 index rose 10.20 points, or 0.4 percent, to 2,507.04. The Dow Jones industrial average rose 56.39 points, or 0.3 percent, to 22,340.71. The Nasdaq composite leaped 73.10 points, or 1.1 percent, to 6,453.26.
The Russell 2000 did even better and continued to set records. It gained 27.95 points, or 1.9 percent, to 1,484.81. After a sluggish few months, the Russell has jumped more than 9 percent since mid-August. The S&P mid-cap and small-cap indexes also climbed.
The Labor Department said Wednesday that orders for long-lasting manufactured goods rose, and a gauge of business investment climbed for the second month in a row. Investors hope that means U.S. manufacturing is getting stronger as the global economy continues to improve, and they bet on continued growth: technology companies rallied for a second day, while the prices of bonds and gold dropped.
“We’ve been waiting for that,” Kate Warne, an investment strategist for Edward Jones, said of the recent improvement. “Business spending has been relatively weak,” with spending by consumers keeping the economy afloat.
Smaller, domestically focused banks, and technology and industrial firms made especially large gains, and the Russell 2000 index of smallercompany stocks made its biggest gain since March. The tax proposal was similar to what investors had come to expect, and with months of negotiations likely ahead and key details missing, it’s not clear what kind of plan might survive the legislative process. But lower corporate taxes could help smaller companies more than large ones.
“A corporate tax cut tends to be better news for smaller companies because they don’t have as many ways to reduce their tax rate,” Warne said.
The yield on the 10-year Treasury note climbed to 2.30 percent from 2.24 percent. That helped banks, as higher interest rates mean they can charge more to lend money. Bank of America picked up 60 cents, or 2.4 percent, to $25.41, and Citigroup rose $1.34, or 1.9 percent, to $72.28.
Meanwhile companies that pay big dividends took steep losses. Kimco Realty, a real estate investment trust that owns outdoor shopping centers, fell 75 cents, or 3.7 percent, to $19.41. Household products maker Procter & Gamble gave up $1.78, or 1.9 percent, to $90.87. Rising bond yields made government bonds a more appealing investment to investors seeking income.
Utility company Scana took its biggest loss in almost nine years after state police in South Carolina said they are looking into “potential criminality” by the company after a nuclear plant construction project was shut down after some $10 billion had already been spent. Its South Carolina Electric & Gas unit and partner Santee Cooper canceled the project in July after contractor Westinghouse filed for bankruptcy.
Scana shares sank $4.35, or 7.8 percent, to a two-year low of $51.22.
Benchmark U.S. crude added 26 cents to $52.14 a barrel in New York while Brent crude, the standard for international oil prices, fell 54 cents, to $57.90 a barrel in London.