Financial sector leads stocks to record highs
US stocks closed at records on Tuesday after bouncing around during the regular session as geopolitical tensions and domestic developments pulled the market in different directions. All three main indexes had traded in record territory earlier but came off highs as North Korea tested a ballistic missile for the first time in more than two months. But the indexes soon regained lost ground after a Republican tax proposal moved a step closer to a Senate vote.
The Dow Jones Industrial Average climbed 255.93 points, or 1.1%, to end at 23,836.71. The S&P 500 SPX, +0.98% added 25.62 points, or 1%, to 2,627.04. The Nasdaq Composite Index COMP, +0.49% rose 33.84 points, or 0.5%, to finish at 6,912.36.
Tuesday's rally was fueled by developments in Washington, including the Senate Budget Committee's approval of the GOP's tax reform bill--which effectively sends the bill to the full upper chamber for a vote. There were concerns that the bill wouldn't make it to the Senate floor due to Republicans' slim one-vote majority in the Budget Committee. In addition, Jerome Powell's Fed Chair confirmation hearing provided support to the broader market and to financials in particular.
The three equity benchmarks have set multiple records in 2017, boosted by factors such as an expanding U.S. economy, rising corporate profits, anemic expected returns for other assets and bets that the Trump administration will deliver tax cuts and other business-friendly policies.
On the data front, the Conference Board's consumer-confidence index jumped to 129.5 in November, well above the 124.8 forecast from economists polled by MarketWatch and marking a 17-year high.
Separately, The advanced U.S. trade deficit in goods rose 6.5% to $68.3 billion in October. Separately, home prices rose at their fastest pace in more than three years in September.
Financial heavyweights like JPMorgan Chase, Bank of America, Wells Fargo and Citigroup finished with gains between 3.0% and 4.0%.
On a related note, the yield curve steepened slightly as U.S. Treasuries sold off, pushing the 2yr-10yr spread to 59 basis points. The yield on the benchmark 10-yr Treasury note climbed two basis points to 2.34%, while the 2-yr yield jumped one basis point to 1.75%. A steeper yield curve bodes well for lenders' earnings prospects.
The industrial sector also finished ahead of the broader market, aas did the lightly-weighted telecom services group. However, the top-weighted technology sector struggled throughout the session. Mega caps like Apple, Alphabet and Facebook weighed on the group, finishing with losses between 0.3% and 0.7%.
It's also worth pointing out that Tuesday's rally was briefly interrupted in the afternoon following reports that North Korea launched a ballistic missile that landed in the Sea of Japan in Japan's exclusive economic zone.
Elsewhere, equity markets in Europe finished Tuesday broadly higher, with the UK's FTSE pacing the advance. After European markets were closed, reports surfaced that the EU and UK have reached a deal on the terms of Brexit liabilities. The pound overcame an early loss to add 0.3% on the U.S. dollar.
On Wednesday, investors will receive the weekly MBA Mortgage Applications Index at 7:00 ET, the second estimate of third quarter GDP (consensus +3.2%) at 8:30 ET, October Pending Home Sales (consensus +0.6%) at 10:00 ET, and the Fed's Beige Book for November at 14:00 ET.
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