Brendan McDermid | Reuters
Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., November 30, 2017.
“A cut in the corporate tax rate, effective next year, along with continued deregulation should bolster profits,” said Ed Yardeni, president and chief investment strategist at Yardeni Research. “Industry analysts are projecting earnings gains of 10.9% this year, 11.4% next year, and 10.1% in 2019. Presumably, these numbers don’t fully reflect the likely big positive impact of a cut in the corporate tax rate next year.”
But concerns about the tax bill passing this year increased Thursday, after Republican Sen. Mike Lee said he was undecided on it. Marco Rubio, another GOP senator, said he’ll vote against the bill unless a proposed child tax credit is expanded.
The major indexes were trading higher before the news about the senators broke, but closed lower. The Dow also snapped a five-day winning streak.
Dow Jones reported on Friday that Republicans agreed to extend the child tax credit, which would likely sway Rubio and Lee to vote in favor of the overall tax bill. The major averages reached their session highs following this report.
“I think the bill is likely to pass, but if it doesn’t, we could see a 5-to-10 percent decline in stocks,” said Ed Keon, managing director and portfolio manager at QMA, the quantitative and dynamic asset allocation business of PGIM.
Equities were on track to post slight weekly gains. The Dow and Nasdaq were up 0.7 percent and 0.2 percent, respectively, entering Friday’s session. The S&P 500 was just higher for the week.
In corporate news, shares of Hess jumped 4.8 percent after reports that Elliott Management is pushing for CEO John Hess to step down or for the company to sell all or part of its business.
Meanwhile, Costco shares rose 4.5 percent after the company reported better-than-expected quarterly earnings and sales.