(February 9, 2017) U.S. equity markets surged on Thursday after President Trump said he would make an announcement regarding taxes in the next few weeks. Investors reacted with optimism with this announcement just like they’ve reacted before when Trump mentions fiscal spending, taxes and regulations.
“Lowering the overall tax burden on American business is big league…that’s coming along very well. We’re way ahead of schedule, I believe. And we’re going to announce something I would say over the next two or three weeks that will phenomenal in terms of tax,” Trump said at a meeting with airline executives.
At the mid-session, the benchmark S&P 500 was trading at 2308.35, up 13.68 or 0.60%. The blue chip Dow Jones Industrial Average was up 0.67% at 20189.62 and the NASDAQ Composite was up 35.19 points, or +0.62% at 5717.64.
Some traders said the move was a continuation of the “Trump Rally” which began on election night. Other expressed a little more caution, saying, that volume is thin and that just because he said it, doesn’t mean he’ll be able to get his tax plan passed by Congress.
The U.S. economic calendar was light on Thursday. Weekly jobless claims fell by 12,000 to 234,000. This was below the consensus estimate of 250,000. Wholesale trade data for December came in as expected, up 1.0%.
In Fed news, St. Louis Federal Reserve President James Bullard said U.S. interest rates can remain low throughout at least 2007, with no clear sense yet of whether the new Trump administration’s policies will touch off higher inflation or growth.
The U.S. Treasury had a 30-year bond auction scheduled for Thursday. Ahead of the auction, Treasurys were under pressure. 10-year U.S. Treasury Notes rose to 2.386 percent and the short-term two-year note yielded around 1.17 percent. The 30-year Bond yielded 3.015 percent.
Trump’s announcement about taxes may have been behind the rise in Treasury yields. Investors may be anticipating a stronger economy because of tax cuts. A stronger economy could encourage the Fed to raise interest rates sooner than the market currently expects.
The possibility of higher interest rates because of lower taxes and a Fed rate hike helped drive April Comex Gold futures lower on Thursday. In addition to Trump’s announcement, gold was pressured by a stronger U.S. Dollar. The Greenback rose on the back of today’s strong economic data and Trump’s tax comment.