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Senate Clears Tax Reforms for Next Year
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Senate Clears Tax Reforms for Next Year

November 4th, 2017 Phil Appleby Economy, News 0 comments

Markets went into overdrive on Friday after news broke that Senate Republicans had been successful in clearing a budget for the next fiscal year. The passing of the budget in the Senate was critical to making the promised tax reforms a reality.

On late Thursday evening, the Senate passed the blueprint for the new budget with a 51 – 49 votes pretty much along party lines. In fact, with the exception of Senator Rand Paul of Kentucky, the entire Republican side of Senate voted for the blueprint. With this move, the government is now almost at the point where it can rewrite the tax reforms. This move also allows the new tax bill to reduce revenue forecasts for the next 10 years by $1.5 trillion.

Senate Clears Tax Reforms for Next Year

Tax Reforms

Democrats voted against the passage of the bill, stating that the proposed tax reforms were designed to benefit the country’s rich at the cost of the rest of the population.

Despite Democratic concerns, the stock market went into a frenzy after this news was released. The market is looking forward to lower taxes as this would benefit the business sector tremendously.

The next step to making this bill a reality is for the House of Representatives to take up the legislation. The expectation is that this could happen as early as next week. According to Marshall Gittler, ACLS Global’s chief strategist, constant action by the government rather than a gridlock or status quo about promised reforms is what is buoying the market and keeping investor sentiment up. This movement will also enable the Federal Bank to raise interest rates safely.

Bank stocks were the first to respond to this “good” news, with the Financial Sector SPDR jumping 0.9%, which was close to its 10-year high. JP Morgan Chase & Co stocks went up by 1.2% while Citigroup’s stocks rose 0.8%.

In the rest of the market, the Dow Jones Industrial Average index rose by 165.59 points, which is 0.7%, to reach 23,328.63 points. The S&P 500 also gained by going up 13.11 points (again 0.5%) to reach 2,575.21 points. The Nasdaq Composite Index also went up by 23.99 points, which is a 0.4% jump, to trade at 6,629.05 points. All three indices chalked up intra-day trading records and are slated to close the trading week at another weekly high.

{Read more about: How to Use Tax Planning to Save Money on College Fees}

The Dow saw a 2% weekly gain, the S&P 500 marked at 0.9% gain and the Nasdaq Composite chalked a 0.4% gain. For the Dow and the S&P 500, this weekly gain would mark the indices’ 6th straight weekly highs. For the Nasdaq, this would be the fourth straight weekly gain. The last time the Dow has such a straight rally was in December last year, when the index’s rally lasted 7 straight weeks. The S&P 500 last saw a 6-week rally in March earlier this year.

Senate Clears Tax Reforms for Next Year

The ICE Dollar Index, which gauges the dollar’s performance against 6 of the main currencies of the world, went up by 0.4% to trade at 93.679. This jump made the weekly gain for the index go by to 0.6%, the highest it’s been in three months. The WSJ Dollar Index, which measures the dollar against 16 other currencies, also rose 0.6% for the day to trade at 86.98, with a weekly gain of 0.8%.

Treasury prices plunged on Friday, which pushed treasury yields up. This capped a week-long sell off of government bonds on the back of the tax reform news. The benchmark 10-year yields jumped 6 points to 2.381%. All other bonds also showed increases with the news of the reforms.

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Phil Appleby

Phil has been around the financial services industry for over 10 years. His career included tenures in investment banking, His skills as a freelance financial writer and knowledge of the field have helped hundreds of readers save money by simply knowing their possibilities, and exploit their saving opportunities.

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