Major U.S. stock indexes hit record highs in a broad rally on Monday as the long-awaited bill to lower taxes looked set to be passed into law and a flurry of dealmaking buoyed sentiment.
More U.S. Republicans Senators on Sunday said they expected Congress to pass the tax bill this week, with a Senate vote set for Tuesday and President Donald Trump expected to sign the bill into law by the end of the week.
U.S. stocks have enjoyed a near year-long rally – the benchmark S&P 500 and the bluechip Dow Jones Industrial Average are set for their best year since 2013 – that has of late been powered by increasing expectations of an imminent tax overhaul.
The bill proposes to cut corporate taxes to 21 percent from 35 percent, which investors are betting will boost profits as well as trigger share buybacks and higher dividend payouts.
"Interest rates are going up, with tax-cut stimulus expected and the stocks that go up the most are the ones that benefit the most from tax cuts," said John Serrapere, Arrow Funds Director of Research. He expects retail and telecom companies to benefit the most.
At 10:42 a.m. ET (1542 GMT), the Dow was up 172.88 points, or 0.7 percent, at 24,824.62 and the S&P was up 16.37 points, or 0.61 percent, at 2,692.18. The Nasdaq Composite was up 54.83 points, or 0.79 percent, at 6,991.41.
Besides the three indexes, the Nasdaq 100 and the S&P 100 also hit record intraday highs.
The materials index gained 1.23 percent, the most among the major 11 S&P sectors. The utilities index was the lone decliner with a drop of 0.8 percent.
Another expected outcome of lower taxes is likely to be cash repatriation, which market analysts say could boost merger and acquisition activity.
On Monday, investors were treated to a flood of deals.
Shares of Amplify Snack soared 70 percent to $11.94 after Hershey said it would buy the SkinnyPop popcorn maker in a $1.6 billion deal. Hershey rose 0.7 percent.
Synder`s-Lance was up about 7 percent after Campbell Soup said it would buy the Pretzels and Cape Cod chips maker for $4.87 billion. Campbell shares rose 1.8 percent.
Casino operator Penn National Gaming said it would buy Pinnacle Entertainment in a $2.8 billion deal. Penn National dipped about 5 percent, while Pinnacle rose 0.3 percent.
Twitter jumped more than 8 percent to a 1-year high after J.P. Morgan said it expects the company to post double-digit daily average user growth of 10 percent in 2018.
Advancing issues outnumbered decliners on the NYSE by 2,200 to 606. On the Nasdaq, 2,127 issues rose and 660 fell.