Stocks, Dollar Jump After Senate Passes Budget Proposal
Stock indexes in Japan and New Zealand extend winning streaks
Riva Gold
Updated Oct. 20, 2017 9:48 a.m. ET
By
Riva Gold
Dollar, yields climb as budget plan passes Senate
Global stocks rise
Nikkei on longest win streak in nearly 57 years
Stocks, the dollar and bond yields edged higher Friday after the U.S. Senate passed a budget blueprint seen as a key hurdle in revamping the tax code.
The Senate’s passage of the budget draft Thursday helps unlock a procedure that Republicans plan to use to rewrite the tax code with just GOP votes, which investors largely see as positive for earnings and economic growth.
“The first hurdle being passed now is positive for tax reform, but there are quite a lot of questions to answer,” said Edward Park, investment director at Brooks Macdonald. Many investors are still unsure when it will be delivered and whether it can be delivered at all, he said.
The Dow Jones Industrial Average rose 43 points, or 0.2%, to 23206 a day after notching its 52nd record close of 2017. If the Dow closes higher Friday, it will mark the most records for the blue-chip index reached in a calendar year since 1995.
The S&P 500 climbed 0.3% while the Nasdaq Co mposite added 0.4%.
The budget vote also boosted the U.S. dollar, with the WSJ Dollar Index recently up 0.5% after hitting its highest level in a month.
In government bonds, 10-year Treasury yields rose to 2.376% from 2.323% Thursday. Yields move inversely to prices. That also came as expectations for the Fed to raise rates in December rose to 93.1% from 82.7% a week ago, according to CME Group.
Corporate results also swung stocks. Shares of General Electric fell 2.4% after it slashed its 2017 projections, but shares of PayPal Holdings rose 5% after the online payments company reported stronger-than-expected earnings.
Companies reporting third-quarter results so far have broadly exceeded expectations in the U.S., helping drive the market higher. Roughly 23% of S&P 500 companies who have reported this season have beat earnings forecasts, according to Thomson Reuters data.
”We’re still in very early stages of the earnings season, but it’s been going very well,” said Lindsey Bell, investment strategist at CFRA Research. The positive effect of the weaker dollar this year and better-than-expected updates from insurers despite hurricanes in the U.S. have been encouraging, she said.
The insurance industry had recorded the largest decline in estimated dollar-level earnings going into the earnings season, according to FactSet.
In Europe, shares of Volvo jumped 7.1% after the Swedish truck maker reported a better-than-forecast third-quarter net profit, while shares of Ericsson rose 5.6% after the Swedish supplier of wireless-communications widened its net loss but investors saw signs that a turnaround effort was starting to bear fruit.
The Stoxx Europe 600 added 0.3% following its biggest daily decline since August, echoing widespread gains across Asian markets.
In Asia, benchmarks in Japan and New Zealand narrowly notched their 14th straight day of gains by climbing less than 0.1%. The Nikkei’s winning streak was its longest in nearly 57 years and the index ended Friday at its highest since 1996.
A trader works on the floor of the New York Stock Exchange.
A trader works on the floor of the New York Stock Exchange. Photo: Michael Nagle/Bloomberg News
Investors however withdrew the most on record from Japanese equity funds in the week ending Oct. 18 following a series of multiyear highs for the Nikkei, according to fund-tracker EPFR Global.
Japan holds an election Sunday and Prime Minister Shinzo Abe’s ruling coalition is projected to remain in power. Mr. Abe has helped push stocks up and the yen down by encouraging loose monetary policy. The dollar was last up 0.6% against the yen.
South Korea’s Kospi rose 0.7% to another record closing high amid gains in index heavyweight Samsung Electronics . Money also fled Korean equity funds at the fastest clip since 2016 this week, according to EPFR.
Hong Kong’s Hang Seng Index rebounded 1.2% after falling 2% Thursday, when a warning from the head of China’s central bank rattled investors.
Australia’s S&P ASX 200 edged up 0.2%, its eighth consecutive daily advance—the longest such streak in 15 months. The index has rebounded 4% in October, putting it on track for its best month of 2017.
Taiwan’s Taiex bucked the trend, falling 0.3% as Apple suppliers Largan Precision and Hon Hai Precision Industry dropped after Apple’s shares were down Thursday.
—Ese Erheriene, Kenan Machado and Kevin Kingsbury contributed to this article.
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