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Dow hits record as investors bet on tax cuts


By Noel Randewich

(Reuters) - The Industrial Average reached a record high on Monday, with banks and retailers surging and technology companies falling as investors realigned their portfolios in hopes of benefiting from expected corporate cuts.

The S&P 500 ended with a loss after hitting an intra-day all-time high earlier in the day, while the technology-heavy Nasdaq dropped 1.05 percent.

Bank of America , JPMorgan Chase , Wells Fargo & Co and Citigroup jumped over 2 percent after the Republican-dominated U.S. Senate approved its bill on Saturday.

Once the Senate and House of Representatives reconcile their respective versions of the legislation, the resulting bill could cut corporate rates to 20 percent from 35 percent.

"It will likely result in increased dividends and share repurchases, and that makes valuations more reasonable and should prolong the rally," said Tim Ghriskey, chief investment officer of Solaris Group in Bedford Hills, New York.

Investors freed up money to buy banks, department stores and other seen benefiting from lower taxes by selling technology stocks, which have become relatively expensive after leading the market's gains this year.

"People are rotating into consumer discretionary and away from technology because of advantages from the new bill," said Michael Matousek, head trader at U.S. Global Investors Inc in San Antonio, Texas.

Microsoft lost 3.77 percent, Nvidia slumped 5.57 percent and PayPal Holdings fell 5.75 percent.

Also lifting financial was a broad expectation that the Federal Reserve will increase interest rates in December, which makes bank lending more profitable.

The S&P 500 index <.SPLRCT> has surged 34 percent in 2017, the market's top performer. But after it fell 3 percent since Nov. 28, investors on Monday became more concerned about the longevity of the sector's rally.

The Industrial Average <.DJI> rose 0.24 percent to end at 24,290.05 points, while the S&P 500 <.SPX> lost 0.11 percent to 2,639.44. Earlier in the session, the S&P 500 had touched a record high.

The Nasdaq Composite <.IXIC> dropped 72.22 points to end at 6,775.37.

The S&P 500 is up 18 percent in 2017 on strong corporate earnings and solid economic growth, as well as expectations that President Donald Trump and the Republican-controlled Congress would cut taxes and corporate regulation.

The index is now trading at about 18.2 times expected earnings, its highest level since 2002, according to Thomson Datastream.

Many department stores pay high rates and stand to benefit from the Republican cuts. Macy's jumped 6.65 percent and Nordstrom surged 3.87 percent.

Media rose after the Financial Times reported that Twenty-first Century Fox had resumed talks to potentially sell most of its assets to Walt Disney .

Disney added 4.72 percent and Fox climbed 2.80 percent.

CVS Health shares lost 4.57 percent after the company agreed to buy Aetna for $69 billion in the year's largest corporate acquisition. Aetna shares fell 1.44 percent.

Advancing issues outnumbered declining ones on the NYSE by a 1.03-to-1 ratio; on Nasdaq, a 1.27-to-1 ratio favoured decliners.

About 7.8 billion shares changed hands on U.S. exchanges, well above the 6.7 billion daily average for the past 20 trading days, according to Thomson data.

(Additional reporting by Sruthi Shankar and Rama Venkat Raman in Bengaluru; Editing by Frances Kerry and Nick Zieminski)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Tue, December 05 2017. 03:04 IST