Dipo Olowookere
By Investors Hub
The major U.S. index futures are pointing to a roughly flat opening on Friday following the strong upward move seen in the previous session. Traders may be reluctant to make any significant moves amid uncertainty about the prospects for the Senate Republican tax reform bill.
Optimism about passage of the bill contributed to the strength seen on Thursday, although GOP leaders were forced to delay a final vote after the legislation hit a snag.
Reports suggest the Senate parliamentarian ruled against the so-called “trigger” proposed by Senator Bob Corker, R-Tenn., which would raise taxes if the economic growth generated by the tax cuts does not offset the cost.
The latest reports suggest that Republicans have rounded up enough votes to pass a revised bill, with a series of roll call votes scheduled for 11 am ET.
The outcome of the final vote on the tax reform bill is likely to have a major impact on the markets, as optimism about a corporate tax rate cut has been a key driver behind the run by stocks to new record highs.
Following the mixed performance seen on Wednesday, stocks moved mostly higher during trading on Thursday. With the upward move on the day, the Dow and the S&P 500 reached new record closing highs.
The major averages finished the day firmly in positive territory but off their highs of the session. The Dow surged up 331.67 points or 1.4 percent to 24,272.35, the Nasdaq climbed 49.58 points or 0.7 percent to 6,873.97 and the S&P 500 advanced 21.51 points or 0.8 percent to 2,647.58.
The strength on Wall Street partly reflected optimism about the outlook for tax reform after Senate Republicans cleared a key procedural hurdle.
The Senate voted 52 to 48 along party lines on Wednesday to begin formal debate on the GOP tax reform bill after negotiations convinced Republican holdouts to vote for the legislation.
The approval of the procedural motion sets the stage for a final Senate vote on the tax reform bill late Thursday or early Friday.
Adding to the optimism about the passage of the bill, Senator John McCain, R-Ariz., announced he would support the legislation.
Upbeat economic data may also have generated some buying interest, with a Labor Department report showing a modest decrease in first-time claims for U.S. unemployment benefits in the week ended November 25th.
The report said initial jobless claims edged down to 238,000, a decrease of 2,000 from the previous week’s revised level of 240,000.
Economists had expected jobless claims to inch up to 240,000 from the 239,000 originally reported for the previous week.
A separate report from the Commerce Department showed personal income increased by slightly more than expected in October, while personal spending rose in line with estimates.
The report said personal income climbed by 0.4 percent in October, matching the increase seen in September. Economists had expected income to rise by 0.3 percent.
The Commerce Department also said personal spending rose by 0.3 percent in October after climbing by a downwardly revised 0.9 percent in September.
Economists had expected spending to rise by 0.3 percent compared to the 1.0 percent jump originally reported for the previous month.
Meanwhile, MNI Indicators released a report showing a modest slowdown in the pace of growth in Chicago-area business activity in the month of November.
Extending the strong upward move seen over the two previous sessions, transportation stocks moved sharply higher on the day. The Dow Jones Transportation Average surged up by 2 percent to a record closing high.
Southwest Airlines (LUV), Union Pacific (UNP), and C.H. Robinson Worldwide (CHRW) turned in some of the sector’s best performances.
Significant strength was also visible among oil service stocks, as reflected by the 1.8 percent gain posted by the Philadelphia Oil Service Index. The strength in the sector came as OPEC and other oil exporters agreed to extend an agreement limiting production through 2018.
Biotechnology stocks also turned in a strong performance, resulting in a 1.8 percent jump by the NYSE Arca Biotechnology Index. With the gain, the index reached its best closing level in over a month.
Natural gas, software and retail stocks also saw notable strength on the day, moving higher along with most of the other major sectors.
