The two chambers of Congress finally approved a $1.5-trillion tax bill that would slash corporate tax rates to 21% from 35%. Wall Street’s main indexes rose slightly on the week as investors were hopeful that lower rates would allow companies to spend additional capital on dividends, new projects and wages, providing a potential boost to the overall economy. As much of the anticipated news of the passing was priced into stocks, traders then focused on the short-term stopgap funding to postpone a government shutdown through mid-January.
In all, the Dow Industrials held onto a 0.4% gain, while the S&P 500 and the NASDAQ were higher by about 0.3%. The transports provided some nice uplift to the overall market climbing nearly 3%, which helped the industrial sector. Energy stocks were the clear winners for the week with a pop of nearly 5%, on average as OPEC plans on continuing production cuts through 2018. Brent crude futures, the international benchmark for oil prices, ended Friday at $65.25 a barrel, its highest close since June 2015. West Texas crude was also higher by $1.17/bbl. to $58.47. Thanks in part to California electric companies being targeted for creating recent wildfires, utilities sank 4.5% this week. Sempra Energy and Edison International fell in sympathy, following PG&E’s decision to eliminate its $2.12 common dividend along with its preferred payouts.
The prospect of further monetary tightening by the Federal Reserve; lingering fiscal policy uncertainties in highly partisan Washington; a constructive outlook for the nation’s economy; the potential for slightly higher inflation; and the elevated earnings multiples now in place, stock market gains in the new year will come with a struggle. Hence, ongoing economic, political and international headwinds provide a backdrop for potentially sudden and steep selloffs, despite this mostly benign scenario. But the long-term picture for equities remains positive.
The happiest of the Christmas season and safe travels to all my loyal readers.
Here is the answer to last week’s trivia question: The Computing-Tabulating-Recording Co., founded in 1911 in Endicott, NY, is now? Texas Instruments, Inc., International Business Machines Corp.(IBM), Automatic Data Processing, Inc. (ADP), or HP, Inc. (formerly Hewlett-Packard). Answer: IBM
Today’s Trivia Question: Sweden’s The Volvo Group (aka AB Volvo), a leading truck, bus and construction equipment manufacturer, includes which famous American truck brand? Peterbilt, White, Freightliner or Mack.