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Dow soars 255 points to record as Senate gets closer to passing tax reform

  • The Senate Budget Committee approved the Senate's tax plan on Tuesday, bringing the upper chamber closer to a floor vote.
  • The Dow, S&P 500 and Nasdaq all hit record highs.
  • Financials had their best day since March 1.

Stocks finished at record highs on Tuesday as the Senate took a step toward passing a bill aimed at reforming the U.S. tax code.

The Dow Jones industrial average closed 255.93 points higher at 23,836.71, with JPMorgan Chase leading advancers. The S&P 500 jumped 1 percent to 2,627.04 as financials climbed 2.6 percent; the sector also had its best session since March 1. The Nasdaq composite gained 0.5 percent, closing at 6,912.36. The Russell 2000, which tracks small-cap stocks, outperformed, rising 1.5 percent.

The major indexes briefly pared gains after North Korea fired a missile that landed in the waters off the coast of Japan. Tuesday marked the first time since mid-September that North Korea launched a missile.

"Obviously, it's a disturbing headline, but it's not as surprising as a few months ago when they first started firing missiles," said Jack Ablin, chief investment officer at BMO Private Bank, noting that's the reason the market isn't selling off.

The Senate Budget Committee approved the Senate's tax plan on Tuesday, bringing the upper chamber closer to a floor vote, which is expected to take place Thursday.

"Once [stocks] bottomed out after the missile, they're coming back. It's almost hypnotic that they'll be able to work something out on the tax bill," said Art Cashin, director of floor operations at UBS.

Expectations of tax reform have been a boon for U.S. stocks. Goldman Sachs sees a 50 percent chance tax reform is accomplished this year and an 80 percent chance it gets done in 2018.

Stocks were also boosted by testimony from Federal Reserve Chair nominee Jerome Powell.

The SPDR S&P Bank exchange-traded fund (KBE) rising 3.2 percent. Bank of America shares, meanwhile, jumped 4 percent, while Citigroup advanced 3.2 percent. Regionals also surged, as the SPDR S&P Regional Banking ETF (KRE) climbed 3.4 percent.

The market likes two words" from Powell's testimony, "and that's 'tough enough,' said Joe Terranova, chief market strategist at Virtus Investment Partners, on CNBC's "Halftime Report."

During his testimony, Powell said that current regulations on the financials sector are "tough enough." He also said he supported the "tailoring" of some regulations to ease the burden on small banks.

This lift in bank stocks "comes at an opportune time because there's been underperformance [in financials] for the month of November, so you'll see investors and speculators get excited about this sector moving forward," Terranova said.

On the data front, the U.S. National Home Price NSA Index rose 6.2 percent in September, according to S&P CoreLogic Case-Shiller. Meanwhile, consumer confidence rose to a 17-year high in November.

In corporate news, Arby's Restaurant Group agreed to buy Buffalo Wild Wings for $157 per share, or $2.4 billion excluding debt. Buffalo Wild Wings rose 6.3 percent.

Meanwhile, Emerson Electric withdrew its $225 per share bid to buy Rockwell Automation. Emerson's stock rose 3.7 percent.

WATCH: Powell gave dovish testimony