10-5-17 12:53 PM EDT | Email Article

By Barbara Kollmeyer, MarketWatch , Ryan Vlastelica

Constellation Brands climbs after earnings, outlook

U.S. stock-index gains accelerated deeper in to records on Thursday afternoon after the House of Representatives passed a budget resolution on Thursday--a step seen as setting the stage for an overhaul of the tax code.

What are stock benchmarks doing?

The Dow Jones Industrial Average rose 90 points, or 0.4%, to 22,749. The S&P 500 index rose 12 points to 2,549, a rise of about 0.5% with financials and technology sector leading the gains. The Nasdaq Composite Index was up 36 points, or 0.6%, to 6,570. All three indexes traded at or near intraday records.

What could drive markets?

After the House vote (http://www.marketwatch.com/story/house-passes-budget-resolution-in-key-step-for-tax-plan-2017-10-05), the Senate is planning to vote on a budget bill on Thursday, and GOP leaders are planning to write a single measure that will pass both chambers. Republicans are aiming to pass tax cuts through what is known as budget reconciliation, which requires just a simple majority in the Senate. Republicans currently control the Senate with 52 seats.

A persistent uptrend for stocks have been partially underpinned by the hope of tax cuts proposed by President Donald Trump, with a likelihood of the passage of a pro-business tax policy often propelling buying in assets perceived as risky.

What are strategists saying?

-- "Up until a week ago there has been a lot of pessimism among investors that the Trump administration cannot pass any tax reforms, especially after the failure to repeal the [Affordable Healthcare Act]. But that seems to have changed last week, when the [Big Six] outlined their tax plan and more people now believe companies' earnings will be boosted by lower tax rates," said Phil Orlando, chief equity market strategist at Federated investors. The so-called Big Six includes the leaders of the House and Senate, national economic director Gary Cohn and Treasury Secretary Steven Mnuchin.

-- "The path of least resistance for markets seems to be higher. Revisions on the earnings front have been positive, the global growth theme is continuing, and I think valuations are fine, given where we are in terms of inflation," said Aaron Clark, portfolio manager at GW&K Investment Management. "There are no classic signs of exuberance that would derail the market's trajectory, and I wouldn't be surprised to see multiples and earnings go higher, absent some crazy macro shock that no one can forecast."

See:Some investors see signs stock market 'on verge' of a melt-up (http://www.marketwatch.com/story/why-stocks-may-be-on-verge-of-a-melt-up-2017-10-04)

Which stocks are in focus?

United Parcel Service Inc. (UPS) fell 1.8% while FedEx Corp. (FDX) was down 0.6% after Bloomberg reported that Amazon.com Inc.(AMZN) was testing a new delivery service (http://www.marketwatch.com/story/ups-fedex-stocks-fall-after-report-of-amazon-testing-new-delivery-service-2017-10-05)that could pose a competitive threat to the package shipping companies. Amazon was up 0.8%.

"These could continue to be volatile as investors worry whether they're the latest in a string of Amazon roadkill," Clark said.

SeaWorld Entertainment Inc.(SEAS) fell 2.5%, erasing a premarket gain that came on news Legoland parent Merlin Entertainments Inc.(MERL.LN) might buy part of the troubled water park operator (http://www.marketwatch.com/story/seaworld-surges-on-reports-of-possible-deal-with-legoland-owner-2017-10-05).

(http://www.marketwatch.com/story/seaworld-surges-on-reports-of-possible-deal-with-legoland-owner-2017-10-05)Corona-parent Constellation Brands Inc. (STZ) gained 4.3% after it reported second-quarter earnings that beat expectations and raised its outlook (http://www.marketwatch.com/story/constellation-brands-stock-jumps-after-profit-beat-raised-outlook-2017-10-05).

What are Fed speakers and data saying?

On Thursday, Fed Gov. Jerome Powell said more rules and regulations aren't always the best solution to problems in financial markets.

Powell is among leading candidates to replace Janet Yellen (http://www.marketwatch.com/story/jerome-powell-in-the-running-for-top-fed-spot-echoes-one-of-trumps-favorite-economic-themes-2017-10-03) as Fed chief when her term at the helm expires in February.

Also read: Pocket guide to Trump's candidates for top Fed spot (http://www.marketwatch.com/story/pocket-guide-to-trumps-candidates-for-top-fed-spot-2017-10-05)

Philadelphia Fed President Patrick Harker (http://www.marketwatch.com/story/feds-harker-says-he-has-penciled-in-december-rate-hike-2017-10-05), in an interview with CNBC said he "penciled in a third rate hike in December."

On the data front, in the latest economic report, initial jobless claims fell by 12,000 (http://www.marketwatch.com/story/jobless-claims-drop-12000-to-260000-as-disruptions-from-hurricanes-ease-2017-10-05) (http://www.marketwatch.com/story/jobless-claims-drop-12000-to-260000-as-disruptions-from-hurricanes-ease-2017-10-05) in the latest week. Separately, the U.S. trade deficit declined (http://www.marketwatch.com/story/us-trade-deficit-falls-to-11-month-low-2017-10-05) to its lowest level in 11 months.

What are other assets doing?

European stocks traded mixed (http://www.marketwatch.com/story/european-stocks-trade-mixed-as-investors-absorb-catalonia-developments-2017-10-05), while Spanish stocks rebounded after posting the biggest loss in 15 months on Wednesday. Spanish assets have been battered in recent days in the fallout from an independence vote from the Catalan region that turned violent.

Read:Catalonia's secession from Spain may come as soon as Monday (http://www.marketwatch.com/story/catalonias-secession-from-spain-may-come-as-soon-as-monday-2017-10-04)

Asian markets traded mostly positive (http://www.marketwatch.com/story/nikkei-swings-to-slight-gains-as-other-asian-markets-rise-2017-10-04), though several markets were shut for holidays.

Oil futures (http://www.marketwatch.com/story/oil-prices-stabilize-after-us-production-hits-july-2015-highs-2017-10-05) rose, the ICE U.S. Dollar Index (http://www.marketwatch.com/story/dollar-higher-against-european-currencies-including-significant-move-against-pound-2017-10-05) added to its two-month high at 93.77, and gold futures (http://www.marketwatch.com/story/gold-tips-higher-aims-for-second-consecutive-gain-2017-10-05) traded little changed.


(END) Dow Jones Newswires

October 05, 2017 12:53 ET (16:53 GMT)

Copyright (c) 2017 Dow Jones & Company, Inc.
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