U.S. equities advanced this week, fueled by the prospect of a tax overhaul.
The Dow led the charge, moving higher by 2.9%, followed from a distance by the S&P 500 which added 1.5%. Meanwhile, the tech-heavy Nasdaq declined 0.6% as technology stocks fell to some profit taking following a big year-to-date run.
The stock market began a new week on Wall Street with a somewhat mixed performance as most traders likely sat on their hands and waited for more news from Washington.
The Senate’s promising progress on tax reform largely fueled this week’s rally, but equities also received support from Jerome Powell’s Fed Chair confirmation hearing, which took place on Tuesday. Mr. Powell’s comments were largely in line with the Fed’s current policy rhetoric, but he did sound a little more relaxed in the area of regulation.
Investors kept an eye on Washington all throughout the week, awaiting the Senate’s vote on its version of a tax reform bill. Things appeared to be progressing nicely as the bill made its way through the Senate Budget Committee on Tuesday and Senator John McCain voiced his support for the measure on Thursday.
Also, North Korea launched a ballistic missile on Tuesday that landed in the Sea of Japan–specifically in Japan’s exclusive economic zone.
The stock market put in a mixed session Wednesday, as traders took profits in technology names. the technology sector was down sharply, with steep losses in the semiconductor stocks. However, the financial and consumer names managed to log solid gains.
Tax efforts hit a bump in the road on Thursday evening when the Senate parliamentarian ruled that a revenue trigger within the bill–which would have raised taxes in the future if economic growth failed to make up for lost tax revenue–is not allowed under Senate rules.
The trigger was a key provision for several GOP Senators who are concerned about the tax overhaul’s potential impact on the national debt.
Senate Majority Leader Mitch McConnell (R-KY) suggested on Friday afternoon that a compromise to appease the aforementioned debt concerns had been reached, saying that the GOP has enough votes to pass the bill. However, an official vote has yet to take place.
There were a few developments that worked against the bulls this week, perhaps the most notable of which was on Friday when former National Security Advisor Michael Flynn’s plea deal with Special Counsel Robert Mueller’s team–which is investigating Russia’s alleged interference in the 2016 U.S. presidential election.
Mr. Flynn pleaded guilty to lying to the FBI about his contacts with a Russian ambassador to the United States and agreed to cooperate with Mr. Mueller’s investigation. An ABC report indicated that Mr. Flynn is willing to answer questions about President Donald Trump, which reignited fears about a potential impeachment.