Closing Market Summary: Stocks Finish Wednesday FlatInvestors played a wait-and-see strategy ahead of the 'unveiling' of President Trump's tax reform plan on Tuesday afternoon, but then engaged in a little profit taking after the announcement provided little new information. The major averages settled just a tick below their unchanged marks with the S&P 500 (-0.1%) closing between the Dow (-0.1%) and the Nasdaq (unch). Meanwhile, the domestically-oriented Russell 2000 (+0.6%) outperformed.
Treasury Secretary Steven Mnuchin and NEC Director Gary Cohn presented the core principles of President Trump's tax plan on Tuesday afternoon. The general framework, which revolves around making business rates more competitive, bringing back overseas profits to create jobs, simplifying the tax system, and lowering tax rates, is certainly encouraging for the stock market.
However, the plan still lacks many details, most notable of which is how the GOP plans to pay for it. Mr. Mnuchin believes the tax cuts will pay for themselves with increased economic growth, the reduction in allowable tax deductions, and the closing of tax loopholes. Still, assuming that logic checks out, the tax cuts would definitely balloon the national debt in the short term, which will be a tough pill for some conservative lawmakers to swallow.
Retailers received a nice bump today, evidenced by the 1.0% increase in the SPDR S&P 500 Retail ETF (XRT 43.53, +0.42), after Mr. Trump's tax plan made no mention of a border-adjustment tax. The retailers' outperformance helped the consumer discretionary sector (+0.5%) close ahead of the broader market.
The health care sector (+0.5%) also put together a positive performance. Reports that the House Freedom Caucus supports the GOP's new health care bill didn't really phase the sector with investors choosing to focus their attention on the earnings front. Thermo Fisher (TMO 168.01, +9.20) helped fuel the health care space's solid performance, adding 5.8% on better than expected earnings/revenues and upbeat guidance.
Elsewhere on the earnings front, three Dow components--Procter & Gamble (PG 87.74, -2.26), United Technologies (UTX 118.20, +1.33), and Boeing (BA 181.71, -1.80)--reported their quarterly results on Tuesday morning. United Technologies finished higher by 1.1% after beating top and bottom line estimates. However, Boeing and Procter & Gamble slipped 1.0% and 2.5%, respectively, after coming up short on revenues; BA missed top-line estimates while PG issued slightly disappointing revenue guidance. PG's negative performance doomed the consumer staples sector (-0.8%) to the bottom of the day's leaderboard with only the real estate group (-0.9%) posting a larger loss.
In the end, only four sectors--consumer discretionary (+0.5%), health care (+0.5%), telecom services (+1.2%), and financials (unch)--finished in positive territory. However, outside of the real estate and consumer discretionary groups, the laggards finished with losses of no more than 0.4%.
U.S. Treasuries settled slightly higher across the board, leaving the benchmark 10-yr yield two basis points lower at 2.31%.
Wednesday's economic data was limited to the weekly MBA Mortgage Applications Index:
- The weekly MBA Mortgage Applications Index increased 2.7% to follow last week's 1.8% decrease.
Tomorrow, investors will receive a slew of economic reports, including March Durable Orders (consensus 1.2%), Initial Claims (consensus 242,000), and Advance International Trade in Goods (consensus -$65.0 billion) at 8:30 ET and March Pending Home Sales at 10:00 ET.
- Nasdaq Composite +11.9% YTD
- S&P 500 +6.6% YTD
- Dow Jones Industrial Average +6.1% YTD
- Russell 2000 +4.6% YTD
