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Stocks notch record close as Trump promises 'big league' tax announcement

U.S. equities rallied on Thursday after President Donald Trump said he would give an announcement regarding taxes in the next few weeks.

"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 be phenomenal in terms of tax," Trump said in a meeting with U.S. airline executives.

The Dow Jones industrial average rose around 115 points to a record, with Goldman Sachs contributing the most gains.

"It's almost a resumption of the Trump trade," said Matt Weller, senior market analyst at Faraday Research. "In his acceptance speech, Trump talked about infrastructure and deregulation, but in recent weeks he'd gotten away from that."

"This is sort of reigniting those animal spirits," he said.

The S&P 500 advanced about 0.6 percent, with financials rising 1.4 percent, hitting a new all-time high. The Nasdaq composite also hit a fresh all-time high, rising 0.6 percent.

"I think it's a combination of investors feeling more confident that some tax package will get worked on. But I think that we also have lower interest rates recently and solid earnings," said Kate Warne, investment strategist at Edward Jones.

However, "just because he says there will be an announcement doesn't mean he will agree with Congress," said Jeremy Klein, chief market strategist at FBN Securities. "It's very low volume. It's pretty quiet and there is a very persistent buyer out there pushing the market higher."

Equities rose broadly following Trump's election, but have mostly traded sideways this year as investors look for clues about the administration's plans on corporate tax cuts, deregulation and government spending.

Michael Nagle | Bloomberg | Getty Images

"Basically, the market is stuck in a tight trading range, and it's unlikely we'll see a catalyst to take us out of it," said Peter Cardillo, chief market economist at First Standard Financial. "Political worries are the factor keeping the market in this range."

"Remove that, and the market would be up 3-to-4 percent," he said.

The S&P 500 traded within a 1 percent range for the 38th consecutive session on Thursday, its longest streak on record, according to data dating back to 1978. The index hasn't seen a 1 percent move, in either direction, since Dec. 7.

"The SPX has been digesting its gains in a consolidation phase near its highs. Breakouts have outnumbered breakdowns in a reflection of healthy market breadth, or participation," said Katie Stockton, chief technical strategist at BTIG, in a note.

The economic calendar was a thin one Thursday, with only two major reports on hand. Weekly jobless claims fell by 12,000 to 234,000, below a consensus estimate of 250,000. Wholesale trade data for December showed a 1 percent increase on inventories.

Meanwhile, St. Louis Federal Reserve President James Bullard said U.S. interest rates can remain low throughout at least 2017, with no clear sense yet of whether the new Trump
administration's policies will touch off higher inflation or growth.

U.S. Treasurys fell Thursday after a 30-year bonds sale, with the benchmark 10-year note yield rising to 2.39 percent and the short-term two-year note yield hovering around 1.18 percent. The 30-year bond yielded 3.016 percent.

Overseas, European equities traded broadly higher, but French yields hit a two-week low amid growing political risk as far-right presidential candidate Marine Le Pen gains more traction.

In an interview with The Economist, the head of sovereign ratings at Standard & Poor's said Le Pen's debt plan for France would trigger a default.

"Investors are looking at French bond and equity markets closely and we think, a rating cut could stimulate a serious tumult in this space. We would expect the CAC40 to sell if there is a rating cut and investors could favour the German equity market," said Naeem Aslam, chief market strategist, in a note. He also said that Moody's, another rating agency, could downgrade France's debt.

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S&P 500
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The Dow Jones industrial average rose 18.06 points, or 0.59 percent, to close at 20,172.40, with Nike leading advancers and Intel lagging.

The S&P 500 gained 13.20 points, or 0.58 percent, to end at 2,307.87, with financials leading nine sectors higher and utilities and materials the only decliners.

The Nasdaq composite advanced 32.73 points, or 0.58 percent, to close at 5,713.

About two stocks advanced for every decliner at the New York Stock Exchange, with an exchange volume of 844.45 million and a composite volume of 3.671 billion at the close.

The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, traded near 10.9.

—Reuters contributed to this report.

On tap this week:

Thursday

Earnings: Agrium, Occidental Petroleum, Nissan, Borg Warner, Dunkin Brands, Expedia, News Corp, Nvidia, Pandora Media, Activision Blizzard, KKR

Friday

Earnings: Aon, Calpine, Buckeye Partners, ArcelorMittal, Ventas, Nippon Telegraph, Interpublic

8:30 a.m. Import prices

10:00 a.m. Consumer sentiment

2:00 p.m. Factory orders