Wall Street stocks pushed to records on Friday as key congressional holdouts on a US tax cut proposal signalled their support, pushing the long-awaited measure closer to the finish line.
All three major US equity indices rocketed to all-time highs as Republican leaders appeared poised at last to hand president Donald Trump a major win.
The progress on the tax bill also boosted the dollar. Equity markets elsewhere were mixed, with London and Frankfurt rising and Paris and Tokyo pulling back.
After a week filled with announcements by major central banks, markets’ attention refocused on Capitol Hill after Thursday when US stocks fell on reports that Republican Senator Marco Rubio threatened to oppose the tax cut measure.
But party powerbrokers tweaked the proposal to satisfy Rubio’s demand that it benefit more middle- and low-income taxpayers.
Republican Senator Bob Corker, who opposed an earlier version of the proposal, also said he would support the final measure.
“As the progress continues, this is a market that continues to reward that progress,” said Art Hogan, chief market strategist at Wunderlich Securities.
“This feels like there’s a lot of enthusiasm about tax reform getting to the endzone.”
Since the president was elected last year, Wall Street has viewed tax reform as Washington’s biggest priority because it would immediately boost corporate profits and was seen as a means to generate faster economic growth.
The bill has progressed in Congress without support from Democrats and some polls have shown weak public support for the measure, in part because of charges that it is a giveaway to the rich that could explode the deficit.
The momentum behind tax reform also helped lift the dollar.
The dollar’s upward move was especially strong against the British pound, which tumbled against major currencies as European Union leaders agreed to open the next stage of Brexit talks, which are expected to be tough.
“The formal shift from phase 1 to phase 2 of negotiations between the UK and EU only intensified the pound’s Brexit migraine this Friday,” said Connor Campbell of Spreadex Ltd.
“What we just went through was meant to be the easy part,” Campbell added.
“Now, the UK heads into the New Year facing an ‘even tougher’ (Angela Merkel) and ‘significantly harder’ (Jean-Claude Juncker) set of Brexit talks, as the country tries to work out what its future trade relationship will look like with the EU while desperately seeking avoid a ‘no deal’ scenario by the 29 March 2019 divorce deadline.”
