Stocks hold near record highs as Congress avoids government shutdown

State of the Nation

Source: MSN Money

U.S. equities fell slightly on Friday, but traded near record levels, after lawmakers agreed on a plan to prevent a government shutdown.

The Dow Jones industrial average slipped 53 points, with Nike leading decliners. The S&P 500 traded 0.1 percent lower, with financials falling 0.4 percent. The Nasdaq composite declined 0.2 percent. Despite small declines, the major indexes remained about 1 percent below record highs set earlier this week. The Senate passed a bill to keep the federal government funded through Jan. 19. The bill, which also cleared the House, is expected to be signed by President Donald Trump. The passing of the spending bill sets up a major legislative victory for the Trump administration and the GOP. Trump is now able to immediately sign another bill that revamps the U.S. tax code. One of the biggest changes to the code is a cut in the corporate tax rate to 21 percent from 35 percent. Investors have been eagerly awaiting this, as they bet that lower taxes will boost companies’ bottom lines. Ben Snider, a strategist at Goldman Sachs, said in a note Thursday, said he expects the tax bill to lift S&P 500 earnings by 5 percent. “Although we believe that US equities have broadly priced the passage of tax reform, considerable uncertainty remains,” Snider said. “In particular, investors still lack visibility into the impact of specific provisions at the company level and how corporate behavior will respond to the new tax code and the incremental cash flows it creates. This uncertainty and shifts in positioning suggest that opportunities still exist – particularly at the micro level – as the market digests the implications of tax reform.” Markets have been on a tear this year as Wall Street awaited lower corporate taxes. The S&P 500 is up 19.9 percent in 2017, while the Dow and Nasdaq have risen 25.4 percent and 29.4 percent, respectively. Craig Callahan, founder and CIO of Icon Advisors, said he expects to see another 10 percent bump higher in stocks over the next year. “We think the market is right at fair value,” he said. Callahan added he expects tech to outperform in 2018, continuing the trend from 2017. In economic news, personal income rose 0.3 percent last month. Economists were expecting a 0.4 percent gain. Durable goods orders, meanwhile, also disappointed, rising 1.3 percent in November. Economists polled by Reuters had forecast an increase of 2 percent. In corporate news, Nike shares slipped 3.1 percent after the athletic apparel maker reported a drop in gross margins. The company’s quarterly earnings and revenue topped estimates, however. Biotechnology company Ignyta soared 72 percent after Swiss drug maker Roche agreed to buy the company for $27 per share, a 74 percent premium to its closing level from Thursday.

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