U.S. Stocks Soar on Renewed Hopes of U.S. Tax Reform

U.S. equity indexes soared on Tuesday with the Dow enjoying its biggest gain since April, on renewed hopes of U.S. tax reform.

In the cash market, the benchmark S&P 500 Index settled at 2452.51, up 24.14 or +0.99%. The blue chip Dow Jones Industrial Average closed at 21899.89, up 196.14 or +0.90% and the tech-based NASDAQ Composite ended the session at 6297.05, up 83.92 or +1.35%.

Information technology led the S&P and NASDAQ. The Dow was boosted by a surge in Boeing. Traders were divided on whether the rally was fueled more by speculation that the White House and Republicans are making progress on tax legislation or on at least a repatriation plan that would involve infrastructure spending.

Some traders also discounted the rally saying the markets are extremely thin and the buying is light.

The key story came from Politico which reported the Trump administration and key lawmakers had found common ground on how to approach tax reform.

Boeing stock rose 1.7 percent after the company received a government contract for intercontinental ballistic missile system replacements. Other defense company stocks also rose after President Donald Trump’s speech on the Afghanistan War on Monday night.

U.S. Treasurys

The benchmark 10-year Treasury note yield rose more than 2 basis points to 2.2 percent, while the two-year yield advanced to trade at 1.329 percent. Rising Treasury yields helped make the U.S. Dollar a more attractive investment.

Gold

Comex gold prices eased on Tuesday, mostly in response to higher Treasury yields and the stronger U.S. Dollar. Increased demand for higher risk, which drove up stocks, also weighed on the dollar-denominated gold market.

Crude Oil

The crude oil market posted a two-sided trade on Tuesday. Oil traded higher at times, helped by expectations of another crude stockpile drawdown in the United States, but hindered by worries over the reopening of Libya’s largest oil field.

U.S. gasoline futures also helped underpin the market. Speculators are betting that heavy rain associated with the remnants of former tropical storm Harvey will cause refinery flooding.

According to the latest weather forecasts, a tropical depression is expected to form over the southwestern Gulf of Mexico on Wednesday or Thursday. While it may not be a major storm, it may lead to the shutdown of a few refineries.

Economic News

There were no major economic reports on Tuesday. The Home Price Index (HPI) rose a disappointing 0.1%. Traders has priced in a 0.5% gain. The previous month’s number was revised down to 0.3%.

The Richmond Manufacturing Index came in at 14. The same as previously reported, but higher than the forecast.