12:00 PM EST - Stocks have started off the week touching record highs on optimism over the passage of pending legislation in Congress that would significantly lower corporate tax rates. Right around the noon hour on the East Coast, the Dow Jones Industrial Average is up close to 180 points; the NASDAQ is ahead by around 59 points; and the S&P 500 is about 16 points to the good. Market breadth is strongly positive and, as might be expected, the number of issues reaching fresh 52-week highs is swamping those hitting new lows.
It appears that votes will be held in the House of Representatives on Tuesday and the Senate on Wednesday on a proposed revision to the tax code that would lower the corporate rate by 40%. Its passage, and subsequent signing by President Trump, seems assured, lifting investor sentiment.
In the meantime, companies are going about their business, with a few mergers announced today. In the food industry, Campbell Soup () plans to purchase snack maker Snyder’s-Lance () for $50 a share in cash. Soup sales have been harder to come by in recent years owing to shifting tastes on the part of consumers, particularly younger ones. The addition of Snyder’s-Lance would bolster Campbell’s snack food division with the addition of name-brand pretzels, chips, and popcorn offerings. Snyder’s-Lance stock jumped on the news.
Elsewhere, confection maker Hershey () has offered to buy Texas-based Amplify Snack Brands () for $12 a share. Hershey no doubt aims to reinvigorate its top line with the move. Amplify is known for its SkinnyPop popcorn and also has line of healthier snacks. Amplify shares surged on heavy volume following the news.
In the gaming space, Penn National () has made a bid to acquire Pinnacle Entertainment () for cash and stock in a move that would diversify operations and lower costs. The combined company would operate 41 properties in North America when all is said and done.
No major economic reports are due out on Monday, but data on the housing market is scheduled to be issued on Tuesday and Wednesday.
Heading into afternoon trading, Wall Street remains broadly bullish. - Robert Mitkowski
At the time of this writing, the author did not have positions in any of the companies mentioned.
Before The Bell - The optimism about an historic tax reform bill, which would lower the corporate tax rate from 35% to 21%, continues to embolden investors. Fresh off of Friday’s notable gains—the Dow Jones Industrial Average, the NASDAQ, and the S&P 500 Index rose by 143, 80, and 24 points, respectively—the U.S. equity market is set to start the penultimate trading week of the year sharply to the upside.
As noted, the big news driving equities higher, with the white-hot Dow 30 now within a stone’s throw of the 25,000 mark, is growing optimism that a comprehensive tax reform plan will be signed into law by year’s end. Corporate America and Wall Street are most enamored with the plan to significantly lower the corporate tax rate. On Friday, the market reversed the previous-day setback as signs pointed to Florida Senator Marco Rubio now on board with the unified tax plan crafted by both chambers of Congress. The bill looks to have the necessary votes to get it to President Trump’s desk for signing within the next two weeks. This news, along with encouraging economic data, commentary by the Federal Reserve last week that it may take a measured approach to interest-rate hikes in 2018, and signs that the ongoing holiday shopping season has been strong, seems to be the perfect cocktail for one of those year-end Santa Claus rallies on Wall Street.
The move higher, though, has not been confined to these shores, as the international indexes have started the new trading week with nice gains. The main indexes in Asia finished well to the upside overnight and the major European bourses are sharply higher as trading moves into the second half of the trading session on the Continent.
This week figures to be dominated by the news from Washington D.C., as investors keep close tabs on the possibility of the Senate and House of Representatives voting on the recently crafted unified tax plan. As noted, right now it is looking like the Republican-led Senate has enough votes to pass the tax plan. Reports have the House of Representatives starting the voting process tomorrow. Meantime, along with the tax news, investors will get some notable reports from the housing sector this week, with data due on housing starts and existing and new home sales. Later this morning, we will get a reading on housing market sentiment. In addition to the housing data, we will receive the final revision on third-quarter GDP (Thursday) and a report on durable goods orders (Friday).
Meanwhile, there was some corporate news to come across the newswires this morning. Of note, struggling consumer goods giant Procter & Gamble ( - ) said it has appointed activist investor Nelson Peltz to its board, despite him narrowly losing a months-long proxy fight, the biggest ever involving a U.S. company, in October. P&G has increased its board size by two members to 13, to accommodate Peltz and appoint a new director in Joseph Jimenez, CEO of drug maker Novartis AG.
With less than an hour to go, the futures, as noted, are presaging a markedly higher opening for the U.S. equity market. It is looking like the hopes of tax reform becoming a reality within the next fortnight is again emboldening investors. With two weeks to go before the end of 2017, the market appears poised to do something that it has never done before, which is finish higher during all 12 months of the year. It has been an historic run since last year’s Presidential election, with a comprehensive tax reform plan at the center of Wall Street’s optimism and such is now looking like a reality as the old year winds down. Stay tuned. – William G. Ferguson