Credit: Shutterstock photoBenchmarks finished in the green on Thursday following gains in bank and energy stocks. Following tax cuts, major banks and telecom companies pledged to provide better pay to their employees, which in turn boosted investor sentiment. Additionally, energy sector rallied upward after WTI oil prices hit its second highest level for the year. Moreover, U.S. GDP increased in the third quarter, posting its best growth pace in more than two years, further supporting the day's gains.
The Dow Jones Industrial Average (DJIA) increased 0.2%, to close at 24,782.29. The S&P 500 Index (INX) rose 0.2% to close at 2,684.57. The tech-laden Nasdaq Composite Index (IXIC) closed at 6,965.36, gaining 0.1%. A total of 6.08 billion shares were traded on Thursday, lower than the last 20-session average of 6.88 billion shares. Advancers outnumbered decliners on the NYSE by a 1.54-to-1 ratio. On Nasdaq, a 1.60-to-1 ratio favored advancing issues. The CBOE VIX decreased 3.5% to close at 9.38.
Tax Bill Optimism Boosts Banks, Telecom
On Tuesday, the House of Representatives passed the Republican tax overhaul Bill after including three provisions, which failed to comply with Senate rules. Early Wednesday, Senate Republicans passed the tax overhaul Bill, excluding these provisions. The Senate voted 51-48 in favor of the Bill, which permanently slashes corporate tax rates from 35% to 21%. After the Senate passed the tax Bill, the House of Representatives voted 224-201 in favor of the Bill again on Wednesday, complying with Senate rules.
Optimism over lower tax rates boosted banks like Wells Fargo & Company WFC and Fifth Third Bancorp FITB , who said the minimum wages paid to their employees will be increased to $15 an hour. Following this development, shares of Wells Fargo and Fifth Third Bancorp increased 2.4% and 1.4%, respectively. Gains in key bank stocks led the Financial Select Sector SPDR (XLF) to advance 0.9%.
Additionally, telecom giant AT&T Inc. T said that the majority of the company's workers will be paid a bonus of around $1,000 in the wake of tax cuts. Gains in AT&T boosted the S&P 500 Telecommunication Services index, which rose 0.7%. AT&T has a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .
Oil Pushes Energy Stocks North
Market maintained a bullish sentiment towards oil prices, which was reflected in both WTI and Brent crude prices. WTI crude rose 0.5% to close at $58.36 a barrel, hitting its second best level of 2017. Additionally, Brent crude prices advanced 0.5% to close at $64.90 a barrel, reaching its highest settlement since June 2015.
Increase in oil prices boosted the Energy Select Sector SPDR (XLE) to advance 2.2%, becoming the best performing sector of the S&P 500. Some of its key components, including Chevron Corporation CVX and Exxon Mobil Corporation XOM rose 3.3% and 1.2%, respectively.
Q3 GDP Best In More Than 2 Years
In its third estimate, U.S. GDP increased by 3.2% in the third quarter, the best pace recorded since the first quarter of 2015. It also improved from the second quarter's pace of 3.1%. Moreover, corporate profits after tax increased 5.7% year over year after a 0.1% uptick in the second quarter of this year.
Additionally, both consumer spending and business investment gained traction in the third quarter. Consumer spending, which accounts for a bulk of U.S. economic output, decreased from 2.3% to 2.2% in the third estimate. Despite moderation in consumer spending, increase in business investment and government expenditure gave a boost to GDP. Domestic economic growth also boosted investor sentiment.
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Fifth Third Bancorp (FITB): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
