Stock markets rally in anticipation of tax cuts
NEW YORK (AP) – Investors’ anticipation of a tax cut reignited the New Year’s rally on Wall Street Monday, sending stocks barreling higher and lifting the Dow Jones industrials more than 170 points. Wall Street expected President Bush, who’s announcing an economic stimulus package on Tuesday, to propose a cut in taxes on dividends to encourage more investment and give consumers more cash to spend.
“That is certain to be a big boost to the stock market,” said Peter Cardillo, president and chief strategist of Global Partner Securities Inc.
The Dow closed up 171.88, or 2 percent, at 8,773.57. The Dow claimed its second triple-digit win in three sessions, having surged 265.89 Thursday on an unexpected jump in the manufacturing sector.
The first three days of 2003 have given the Dow its second best ever start to a new year with a gain of 5.2 percent, according to Markethistory.com, a financial research Web site. The Dow had its best three-day New Year’s rally in 1938 when it climbed 7 percent.
The broader market also rallied on Monday. The Nasdaq composite index rose 34.25, or 2.5 percent, to 1,421.33. The Standard & Poor’s 500 index advanced 20.42, or 2.3 percent, to 929.01.
Investors are hopeful Bush will propose a series of tax cuts that will pull the economy out of its doldrums and will help the market break its three-year losing streak. Bush is expected to propose reducing taxes paid by individuals as well as eliminating the taxation of investor dividends.
The entire plan would amount to $600 billion in tax savings over 10 years.
“The investor will be able to capture all of that dividend and put more money in his pocketbook. It will be beneficial to the stock market as well as the economy,” Cardillo said.
Conservative politicians and Wall Street have long criticized the so-called double taxation of dividends – first with corporations paying corporate income taxes on the earnings it pays in dividends and then by investors paying taxes on the dividends they receive.
Stocks that pay dividends, particularly big-name blue chips, were among Monday’s winners. IBM rose $1.94 to $83.59 and Exxon Mobil advanced 88 cents to $36.38.
Advancing issues outnumbered decliners by more than 3 to 1 on the New York Stock Exchange. Trading volume was moderate at 1.40 billion shares, up from 1.13 billion on Friday.
The Russell 2000 index, which tracks smaller company stocks, rose 6.69, or 1.7 percent, to 397.00.
Overseas, Japan’s Nikkei stock average finished Monday up 1.6 percent. In Europe, France’s CAC-40 rose 0.7 percent, Britain’s FTSE 100 slipped 0.1 percent and Germany’s DAX index climbed 2.1 percent.
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