Wall Street set for strong open as tax bill nears passage

By Sruthi Shankar

(Reuters) - Wall Street's main indexes were set for strong gains on Wednesday after the U.S. Senate approved a sweeping $1.5-trillion tax bill that is expected to boost corporate earnings and lead to higher dividends and stock buybacks for investors.

The bill was approved on a 51-48 vote, but the Senate had to send it back to the House of Representatives for a re-vote due to a procedural snag. The final approval is expected later in the day, before the bill is sent to President Donald Trump to be signed into law.

The proposed changes in the bill include cutting the corporate tax rate to 21 percent from 35 percent from Jan. 1, which many strategists estimate could boost earnings by between roughly 7 percent to 10 percent next year.

The much-anticipated tax cuts have powered a record-setting rally in U.S. stocks. The benchmark S&P 500 has risen nearly 20 percent so far this year, its best since 2013.

"I believe this bull market has quite a bit more to run, certainly the next six months there's lot of possibility for upside," said Randy Frederick, vice president of trading and derivatives for Charles Schwab in Austin, Texas.

At 8:25 a.m. ET (1325 GMT), S&P 500 e-minis were up 9.25 points, or 0.34 percent, with 189 contracts changing hands.

Nasdaq 100 e-minis were up 25.25 points, or 0.39 percent, in volume of 47 contracts.

Dow e-minis were up 95 points, or 0.38 percent, with 9 contracts changing hands.

But Frederick, like other market experts, says the market has already priced in the tax cuts and a slight retreat would not be out of place.

"We might see a small pullback once the bill is signed into law, not more than 1 or 2 percent," he said.

Indeed, Wall Street fell on Tuesday as excitement over the tax revamp was offset by concern over its effect on years of monetary policy stimulus and the future of interest rates.

FedEx Corp, which reported results on Tuesday, gave an upbeat earnings forecast for 2018 as it hopes to benefit from the tax overhaul. Its shares were up about 2 percent premarket.

Chipmaker Micron jumped 7 percent after its strong results and forecast, allaying concerns that a boom in chip demand had peaked.

Intel rose 1.5 percent, while chip equipment makers Applied Materials and LAM Research jumped 2.2 percent and 2.8 percent, respectively.

But not all tech stock were higher. Linux distributor Red Hat, up 85 percent this year, fell 2.3 percent after its quarterly report.

Biogen rose 1.2 percent after Credit Suisse raised its rating to "outperform", saying Wall Street is underestimating the sales potential for key drug, Spinraza, outside the United States in 2018.

(Reporting by Sruthi Shankar in Bengaluru; Editing by Saumyadeb Chakrabarty and Savio D'Souza)