U.S. stocks closed higher Wednesday after the release of the GOP's tax plan framework and as investors eyed higher interest rates.
The hit an all-time high of 2,511.75 but failed to set a record close. Financial stocks climbed 1.3 percent and information technology stocks also rose more than 1 percent as the best performers in the index. Utilities, real estate investment trusts and consumer staples led index declines.
"The whole sentiment of the strong market is I think due to the tax relief hope," said Peter Cardillo, chief market economist at First Standard Financial.
The Dow extended its gain after the House Freedom Caucus, a group of conservative GOP lawmakers, endorsed the Trump tax reform plan outlined on Wednesday. The plan includes softer tax treatment for American companies to bring back profits they have held abroad, a process known as repatriation that is boosting shares of companies like Apple and Microsoft.
The Nasdaq composite outperformed, closing up more than 1 percent in its best day since Aug. 22. The three major indexes closed within half a percent of their all-time highs.
The GOP framework on tax reform released Wednesday would reduce the corporate tax rate to 20 percent, as many expected. It also proposes to create just three individual tax rates and double the standard deduction.
For months, many market strategists have laid out how the White House's proposed tax reform could significantly increase corporate profits, particularly for financials and small-cap stocks.
The small-cap Russell 2000 hit another all-time high of 1,487.95 Wednesday and closed at a record. The Dow transports also hit a record high.
"The year is going to be marked by the constant tug and war between hope of fiscal stimulus and the reality of monetary policy," said Peter Boockvar, chief market analyst at The Lindsey Group.
U.S. Treasury yields rose, with the hitting a high of 1.483 percent, its highest since Nov. 4, 2008. The 10-year yield hit 2.314 percent, its highest since Aug. 1.
The U.S. dollar index traded 0.37 percent higher to 93.35, after earlier hitting 93.607, its highest since Aug. 23.
Fed Chair Janet Yellen on Tuesday said the Fed should be "wary of moving too gradually" especially since "persistently easy monetary policy" might have "adverse implications for financial stability." But she also said the Fed may have overstated the labor market's strength and rate of inflation.
Stocks closed narrowly mixed Tuesday. The Dow Jones industrial average fell for a fourth straight day, with McDonald's having the greatest negative impact on the index.
On Wednesday, U.S. crude oil futures settled 26 cents higher at $52.14 a barrel, after a surprise drop in U.S. crude stockpiles.
"You get a rotation in two underowned sectors, financials and energy, that could be the driver," said Art Hogan, chief market strategist at Wunderlich Securities.
Earlier, the stock was the greatest negative impact on the Dow after the company reported its slowest quarterly sales growth in nearly seven years and forecasting a further drop in revenue from North America. The athletic wear company did report a
In economic news, durable goods orders showed a 1.7 percent increase in August. Non-defense capital goods orders excluding aircraft rose 0.9 percent, versus the 0.3 percent increase expected by economists polled by Reuters.
Pending home sales fell 2.6 percent in August.
Gold futures for December delivery fell for a second straight day to settle at $1,287.80 an ounce.