Wall Street closes at record highs with tax overhaul in sight

NEW YORK (Reuters) – Wall Street’s three major indexes climbed to record closing highs on Friday with broad-based gains as a long-awaited bill to cut corporate tax rates looked like it would win enough support from lawmakers to pass.

The bill is expected to drop corporate tax rates to 21% from 35%, and some investors are betting that companies will put most of the savings toward a boost in shareholder payouts.

“It’s meaningful in terms of its impact on shareholders. You’re going to see an increase in stock buybacks, maybe some dividend payouts,” said David Joy, chief market strategist at Ameriprise Financial in Boston.

“By and large there’s a high correlation between higher equity prices and consumer confidence and consumer spending. Some translates into rising consumer sentiment and better feelings about job security,” he said.

The S&P was up 1% after Sen. Bob Corker announced his support, but couldn’t sustain those levels as investors awaited tax bill details, according to Brian Battle, director of trading at Performance Trust Capital Partners in Chicago.

“We don’t know how stimulative it will actually be,” said Battle. “There shouldn’t be any surprises. The stuff they were apart on seems manageable.”

The Dow Jones Industrial Average rose 143.08 points, or 0.58%, to 24,651.74, the S&P 500 gained 23.8%, or 0.90%, to 2,675.81, and the Nasdaq Composite added 80.06 points, or 1.17%, to 6,936.58.

The S&P 500 and the Dow closed higher for the fourth week in a row, while the Nasdaq saw its first weekly gain out of three.

The S&P’s Energy index was the only one of its 11 majors in the red with a 0.03% dip. Technology and Healthcare indexes led the advance with 1.24% and 1.17% gains, respectively.

The S&P financial index closed up 1.04%, paring earlier gains. Banks are seen as one of the biggest beneficiaries of tax reform.

The S&P consumer staples index rose 1.12%. Costco was its biggest percentage gainer, up 3.7%, after the retailer reported upbeat results.

CSX tumbled 7.6%. The railroad said its CEO Hunter Harrison was taking medical leave amid its controversial turnaround plan.

“Quadruple witching,” the simultaneous expiration of US options and futures contracts for stocks and indexes, boosted volume to 10.7 billion shares, well above the 6.73 billion average over the last 20 trading days, and the highest since a year ago.

The Bank of Israel on Friday set its representative rate for the US dollar at NIS 3.5230, for the British pound at NIS 4.7296, for the Canadian dollar at NIS 2.7637, and for the Australian dollar at NIS 2.7061.

The central bank set the representative rate for the euro at NIS 4.1549, and for 100 yen at NIS 3.1420.