Wall Street hit record closing highs on Monday as optimism increased about the likelihood of lower corporate tax rates as the Republican tax bill moved closer to passage. The Nasdaq surpassed the 7,000-point mark during the session but closed below that level.
The Republican-controlled Congress is expected to begin voting on sweeping tax legislation on Tuesday, aiming to get the bill to the President’s by the end of the week. Republican Senator Susan Collins said she would vote for the sweeping overhaul, all but ensuring its passage.
The major equity indexes have enjoyed a near year-long rally, with the benchmark S&P 500 and the blue-chip Dow Jones Industrial Average set to chalk up their best year since 2013.
The bill would cut corporate tax rates to 21 percent from 35 percent, which investors are betting will boost profits as well as trigger share buybacks and higher dividend payouts.
Another expected outcome of lower taxes is cash repatriation, which could raise the number of mergers and acquisitions we see in 2018.
The S&P 500 materials index gained 1.5 percent, the most among the major 11 S&P sectors. The utilities index had the largest decline, with a drop of 1.2 percent. Utilities suffer from higher interest rates, which the Federal Reserve announced last week, and they are expected to see less upside from tax cuts than other sectors.
On Monday, investors were treated to a flood of deals. Shares of Amplify Snack soared 71.6 percent to $12.01 after Hershey (HSY.N) said it would buy the SkinnyPop popcorn maker in a $1.6 billion deal. Hershey rose 0.1 percent.
Snyder‘s-Lance rose 6.9 percent after Campbell Soup said it would acquire the Pretzels and Cape Cod chips maker for $4.87 billion.
Casino operator Penn National Gaming said it would buy Pinnacle Entertainment in a $2.8 billion deal. Penn National fell 2.2 percent, while Pinnacle’s shares were up 0.7 percent.
Twitter rose 11 percent after JPMorgan said it expects the company to post double-digit daily average user growth in 2018.
Approximately 7.1 billion shares changed hands on the major domestic equity exchanges, as compared to the 6.8 billion share daily average for the past 20 trading days, according to Thomson Reuters data.