- The Dow Jones industrial average closed 80 points higher after briefly falling 84 points. The index also hit a record intraday high.
- The tax plan would cut mortgage interest deductions in half. However, it would keep retirement savings plans like the popular 401(k) intact.
U.S. equities closed mostly higher on Thursday after a wild session as investors examined the details of the tax-reform plan proposed by Republicans.
The plan would permanently lower the corporate tax rate to 20 percent. It would also keep retirement savings plans like the popular 401(k) intact.
The Dow Jones industrial average closed 81.25 points higher at 23,516.26 — a record — after briefly falling 84 points. The index also hit a record intraday high. Shares of Boeing were the best-performers on the 30-stock index.
"People are building their frameworks, but no one knows where this is going to go," said Jeremy Bryan, portfolio manager at Gradient Investments.
The closed marginally higher at 2,579.85 — erasing earlier losses — as financials rose 0.9 percent. The index closed just above the flatline. Shares of Allstate were among the best-performing stocks in the financials sector, rising 3.8 percent.
Shares of T. Rowe Price, meanwhile, jumped to finish 2.2 percent higher as asset managers reacted positively to the 401(k) news.
"What the market is celebrating is that the process moves forward but the process faces many hurdles," said Art Hogan, chief market strategist at Wunderlich Securities. "But I think the market slowly comes to the realization that it's 2018's business."
Yet, the plan would also cut mortgage interest deductions in half and then hit homebuilder and consumer-related shares. Also, it lowers the tax rate on repatriated cash to 12 percent.
Homebuilder stocks took a hit, with the SPDR S&P Homebuilders exchange-traded fund (XHB) sliding 2.5 percent. Shares of Toll Brothers fell 6.1 percent, while M.D.C. Holdings pulled back 12 percent.
The Nasdaq composite closed just below breakeven at 6,714.94; it fell earlier as tech investors were left disappointed with the 12 percent rate on repatriated cash. A lot of big tech companies have scores of cash outside of the U.S.
"The market sees this as a disadvantage to consumption in favor of more long-term investments," said Jack Ablin, chief investment officer at BMO Private Bank. "Consumption is a short-term endeavor while investment is more long-term."
"Nothing is easy, however, and there is still tension over what tax provisions can be limited or eliminated to offset aggressive cuts in marginal corporate and personal rates. A balance will need to be struck," Steve Blitz, chief U.S. economist at TS Lombard, said in a note.
The increasing prospects of tax reform have recently helped U.S. stocks reach record levels.
Phil Blancato, CEO of Ladenburg Thalmann Asset Management, said "the market still doesn't believe tax reform will get done this year," however. "There are too many Senate Republicans that are not behind this plan."
Top White House economic advisor Gary Cohn said Trump would support the bill so long as it preserves key elements.
Investors also saw Trump nominate Fed Governor Jerome Powell to become the central bank's next chair. Powell's nomination was widely expected by experts and most investors.
"Powell is dovish. The current Fed chair, Janet Yellen, is dovish. I think the market has priced in a dovish Fed chair," said Adam Sarhan, CEO of 50 Park Investments. "Central banks are slowly raising rates, but they are still very low relative to historical levels."
If confirmed, Powell would replace Yellen, who took over as Fed chair in 2014.
"While it is expected that he will continue the gradual path towards rate normalization, there are questions regarding his views on the continuing de-regulation of the financial industry," said Quincy Krosby, chief market strategist at Prudential Financial, in a note. "Under Powell expect a pragmatic path on monetary policy, along with an equally pragmatic path on industry regulation. In other words, continuity with a Republican tilt."
Wall Street also kept an eye on earnings after tech giant Facebook posted better-than-expected quarterly results. Facebook reported adjusted earnings per share of $1.59, well above the expected $1.28.
Companies set to report Thursday after the bell include Apple, Starbucks and CBS.
Overall, earnings have mostly outperformed expectations this season, adding to the stock market's already strong gains for the year. As of Thursday morning, nearly 73 percent of the companies that have reported have surpassed earnings expectations, according to Thomson Reuters I/B/E/S.
—CNBC's Patti Domm contributed to this report.