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Stocks close sharply higher amid tax reform optimism

CNBC logo CNBC 4/20/2017 Fred Imbert

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Stocks rose sharply Thursday as more companies released quarterly results and as Treasury Secretary Steven Mnuchin said the administration is close to a plan for major tax reform.

Mnuchin, who this week backed off of his earlier goal of passing tax reform by August, said the White House will unveil a plan "very soon." However, the Trump administration previously set deadlines for releasing its tax plan that it did not meet.

The Dow ended 174 points higher, with American Express contributing the most gains. The credit card giant reported better-than-expected first-quarter earnings, lifted in part by higher spending numbers from card members.

The S&P 500 gained 0.75 percent, with financials, industrials and materials rising more than 1 percent to lead advancers. The Nasdaq outperformed, rising 0.9 percent.

"Corporate America is hanging in there despite softening economic data," said Lindsey Bell, investment strategist at CFRA. "I know Verizon was a disaster but you got some pretty good results out of American Express and CSX."

Verizon, another Dow member, missed the mark on both earnings and revenue. The company attributed a 5.1 percent drop in sales to decreased overage revenue, lower postpaid customers in the quarter and continued promotional activity.

Railway company CSX posted better-than-expected results and said it expects profit to jump 25 percent this year. The stock rose more than 6 percent to lead the Dow transports, which popped more than 1.5 percent.

The SPDR S&P Regional Banking ETF (KRE) and the Bank ETF (KBE) rose more than 1 percent. Steel stocks also caught a bid after President Donald Trump said he directed the Commerce Department to prioritize a probe on foreign steel products' effect on U.S. national security. Shares of U.S. Steel surged more than 7 percent.

"There are just a bunch of little things adding to this rally today," said Jeremy Klein, chief market strategist at FBN Securities.

Equities posted a mixed session on Wednesday as IBM shares dragged the Dow lower while energy stocks pinned down the S&P 500.

"From a broader perspective, we're bouncing back and forth as the soft data has not yet filtered into the hard data," said Brent Schutte, chief investment strategist for Northwestern Mutual Wealth Management. "Today, we're seeing a bit of that," he said referring to the mostly strong quarterly reports.

U.S. crude prices slipped 10 cents to $50.34 per barrel on Thursday. WTI fell nearly 4 percent on Wednesday after the Energy Information Administration released bearish supply data for the market.

"This is a dicey one because the market is being hit by a confluence of events," said Quincy Krosby, market strategist at Prudential Financial. "What the market needs right now is a clutch of unequivocally strong hard data" to regain its footing.

Investors also looked ahead to the first round of the French presidential election, which is scheduled for Sunday. Uncertainty around the election has grown over the past month after far-left candidate Jean-Luc Melenchon's surprising surge in the polls.

According to French pollster Ifop, Melenchon was just five percentage points behind the front-runner, centrist Emmanuel Macron as of Wednesday.

In economic news, initial jobless claims rose to 244,000, topping expectations, while the Philadelphia Fed business index fell to 22 in April from 32.8 in March. Leading indicators rose more than expected in March.


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