The major equity indexes rose to record highs again on Thursday, benefiting from a move into riskier assets. There was also increased optimism over a tax overhaul as Congress moved closer to agreement on a budget resolution along with the recent signs of economic strength.
The House of Representatives voted to adopt a fiscal 2018 spending blueprint containing a legislative tool that would let Republicans bypass Democrats and pass a tax bill by a simple majority vote in the Senate, where they hold 52 of 100 seats.
Data pointed to underlying strength in the economy despite weather-related disruptions, with the trade deficit narrowing in August and jobless claims falling more than expected last week.
New orders for goods made in the United States rose in August and orders for core capital goods were stronger than previously reported.
Netflix rose 5 percent after the company raised the monthly subscription fees for two of its three main U.S. plans by $1 and $2, respectively.
The S&P financial index up 1.1 percent, led sector gains. Banks rose after Randal Quarles was confirmed as vice chair of the Federal Reserve. The banking sector widely expects Quarles to play a key role in efforts to ease regulations.
Investors are also looking ahead to the monthly jobs report on Friday and the upcoming third-quarter corporate earnings season. The Street is expecting that S&P 500 companies will see an overall 5.5 percent earnings increase in the quarter from a year earlier.
While that would be down from the double-digit growth in the first two quarters of this year, the index is still likely to finish 2017 at 2,525, or about 13 percent higher than where it was at the end of 2016.
Amazon was up 1.6 percent after the company said it was testing its own delivery service, potentially encroaching on the territory of package delivery companies such as UPS and FedEx.
The Day’s Economic News
The number of new claims for unemployment benefits fell more than expected last week, but the continued impact of Hurricanes Harvey and Irma on the data made it difficult to get a clear picture of the labor market.
The Labor Department reported on Thursday morning that initial claims for state unemployment benefits fell by 12,000 claims to seasonally adjusted 260,000 claims for the week ended Sept. 30.
Harvey and Irma along with Hurricane Maria affected claims for Texas, Florida, Georgia, Puerto Rico and the Virgin Islands, a Labor Department official said.
Claims rose from a low of 236,000 in late August, hitting an almost three-year high of 298,000 at the start of September. As a result, Harvey and Irma are expected to cut into job growth in September.
Other data on Thursday indicated that the trade deficit narrowed in August as exports of goods and services rose to more than a 2-1/2-year high. Orders for core capital goods were stronger in August than previously reported.
What that means is that trade and business spending on equipment could help to offset some of the anticipated drag on third-quarter economic growth from the storms.
According to a Reuters survey the nonfarm payroll report to be released on Friday, will show an increase of 90,000 jobs in September, after rising by 156,000 jobs in August.
The labor market disruptions are expected to be temporary, with the job market generally remaining strong.
Unemployment claims have been below the 300,000 claims threshold, which is associated with a robust labor market, for 135 consecutive weeks. That is the longest such stretch since 1970, when the labor market was smaller.
In a separate report on Thursday, the Commerce Department said the trade gap declined 2.7 percent to $42.4 billion, the smallest since September 2016. When adjusted for inflation, the trade deficit was little changed at $61.8 billion. The so-called real trade deficit average for July and August was below the second-quarter average of $62.4 billion.
That suggests trade could contribute to gross domestic product in the third quarter and help to soften the economic blow of the hurricanes, which are expected to cut at least six-tenths of a percentage point from economic growth in the third quarter. Trade added two-tenths of a percentage point to the second quarter’s 3.1 percent annualized growth pace.
Growth estimates for the third quarter are as low as a 1.8 percent rate. In August, exports of goods and services increased 0.4 percent to $195.3 billion, the highest level since December 2014. Exports to China increased 8.8 percent.
Imports of goods and services fell 0.1 percent to $237.7 billion in August, with imports of industrial supplies and materials hitting their lowest level since November 2016.
Imports of goods from China rose 5.1 percent to a record high. The politically sensitive U.S.-China trade deficit increased 4.0 percent to $34.9 billion in August, the highest level since September 2015.
In another report, the Commerce Department said orders for non-defense capital goods excluding aircraft – seen as a measure of business spending plans – rose 1.1 percent in August instead of the 0.9 percent increase reported last month.
Shipments of these so-called core capital goods, which are used to calculate business equipment spending in the gross domestic product report, were up 1.1 percent instead of the previously reported 0.7 percent rise.
Strong business spending on equipment is helping to underpin manufacturing, which makes up about 12 percent of the economy. Business investment in equipment grew at its fastest pace in nearly two years in the second quarter.