Tax-plan Wednesday could turn into a make-or-break day for this stock market.
Expect investors to zero in on what the White House has to say about corporate taxes — widely expected to be cut to 15%, as will the top income-tax rate. There’s wariness about just how much POTUS can achieve, given the pushback over health care, and there are worries about a potential government shutdown wreaking havoc in the near term.
But where the market’s concerned, President Trump has some tailwinds behind him, after the DJIA DJIA, +0.07% tested 21,000 and the Nasdaq COMP, -0.02% reached 6,000.
On to our call of the day, which spells out what a disappointing tax plan could mean for stocks. Konstantinos Anthis, head of research at ADS Securities, says after recent weak economic data and mixed corporate results, the fiscal reforms are even more important.
“With U.S. equity indexes trading at or near recent highs, investors have put a lot of stock behind today’s announcement, and if Trump fails to provide the specifics of his plan or explain how he intends to pay for it, then a pullback below 20,850 points for the Dow Jones and 2,375 points on the S&P 500 wouldn’t surprise us,” says Anthis.
Meanwhile, LGC’s Ipek Ozkardeskaya says the DJIA’s all-time high of 21,162 “could be bettered within this week,” if the White House pleases investors. If not, she sees a move south toward the 50-day moving average of 20,740.
There’s no doubt in Michael O’Rourke’s mind which way the dice will fall. The JonesTrading strategist is convinced the tax announcement will be an “unrealistic, massive disappointment.”
“It will be hard (likely impossible) for the president to get his own party to approve massive unfinanced corporate tax cuts, let alone the Democrats,” he tells clients. “Many politicians in Washington want to see the president fail. The more he promises and raises expectations, the more likely it is that he will.”
O’Rourke reminds us that for every single percentage point reduction in the corporate tax cut, the government has to come up with $120 billion in revenue.
Key market gauges
New highs? It’s looking tough. Dow YMM7, +0.03% and S&P 500 futuresESM7, +0.06% are down and Nasdaq NQM7, +0.20% futures are barely higher. European stocks SXXP, +0.17% are not doing much, but Asia ADOW, +0.46% finished in the green.
The dollar is trading easier against the yen USDJPY, +0.36% , and goldGCM7, -0.28% is off as well. Oil prices CLM7, -0.77% are staying under $50 a barrel ahead of oil data.
Read Market Snapshot for more.
Plus: Gold’s tempered climb makes gains more ‘sustainable’, says Milling-Stanley
The buzz
Twitter TWTR, +10.76% shares are in the grips of the biggest one-day, post-earnigns rallysince early February after smashing past earnings forecasts.
United Tech UTX, -0.10% is also climbing on its profit and sales beat. BoeingBA, -1.07% is down after revenue fell short of estimates.
Also in the big batch of earnings ahead of the open: Procter & Gamble PG, -1.98% , Pepsi PEP, -1.62% and Hershey HSY, -1.07% , to name a few.
Check out earnings previews for Tesla TSLA, -0.58% ,
Chipotle CMG, +3.39% is up 3% higher after an earnings beat. However, the company said it has detected some “unauthorized activity” in the card payment network at its restaurants.
Fresh on the heels of plans for a retaliatory tariff against Canadian lumber, U.S. Commerce Secretary Wilbur Ross warned the White House may take action to protect aluminum, semiconductor and shipbuilding industries.
The chart
Is it the S&P 500’s turn for a go at record territory? This chart indicates that could be on the cards soon enough.
MarketWatch
The index has gained 1.7% over the past two days, for its biggest two-session percentage gain in over five months. Read more about that here: S&P 500 ‘looks destined’ to notch a fresh all-time closing high, say chart watchers
The quote
Wednesday’s early morning tweetstorm came after a San Francisco judge blocked Trump’s executive order pulling funding from sanctuary cities. The court cited comments from Sean Spicer in tossing out government lawyers’ arguments.
The stat
Caters News Agency, via New York Post
3 feet long — That was the size of Simon, on track to be crowned the world’s largest bunny, who was unfortunately found dead in the cargo hold of a United AirlinesUAL, +0.14% flight from London on landing in Chicago. His father Darius, was the previous title holder at 4 foot, 4 inches.
“Simon had a vet’s checkup three hours before the flight and was fit as a fiddle,” said the rabbit’s hopping mad owner, U.K.-based breeder Annette Edwards.
The airline cannot seem to get a break. Shares have barely recovered from an overbooking and passenger-dragging PR disaster earlier this month.
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