Tax Reform Plans Supported the S&P 500, NASDAQ, and Dow
The S&P 500 started this week on a weaker note by pulling back on Monday. However, the market started to stabilize and regained strength as the week progressed amid the improved market sentiment. On September 28, nine out of the 11 major sectors closed the day with gains. Strength in the materials and real estate sectors pushed the market higher. On the other hand, weakness in the consumer discretionary and industrials sectors limited the gains.
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The market sentiment and risk appetite were weak at the beginning of this week amid North Korea concerns, Germany’s elections, and the technology sector sell-off. The sentiment improved after Fed Chair Janet Yellen’s hawkish comments on inflation and interest rates in her NABE speech. The market gained additional strength following President Trump’s tax reform proposal. The proposed plan includes a change of tax brackets from seven to three and a reduction of the corporate tax rate from 35% to 20%. The plan strengthened the market sentiment and pushed the market higher on Wednesday and Thursday. On the economic data front, according to the U.S. Bureau of Economic Analysis, the final reading of the US second-quarter GDP rose 3% to 3.1%.
On September 28, the S&P 500 opened the day lower but regained strength and closed at a fresh record close. The CBOE Volatility Index (or VIX) measures uncertainty in the market. On September 28, it fell 3.2% to 9.55. The VIX is measured on a scale of one to 100 with 20 as the historical average. The VIX is also called the “fear index.” It usually has an inverse relationship with stocks and rises when the S&P 500 falls.
NASDAQ and Dow
The NASDAQ Composite Index and Dow also opened the day lower but closed the day with gains. The NASDAQ Composite Index closed the day at 6,453.45 with a gain of 0.01%. The Dow Jones Industrial Average rose 0.18% and closed at 22,381.20.
In the next part of this series, we’ll discuss the S&P 500’s top gainers on September 28.