"A cut in the corporate tax rate, effective next year, along with continued deregulation should bolster profits," said Ed Yardeni, president and chief investment strategist at Yardeni Research. "Industry analysts are projecting earnings gains of 10.9% this year, 11.4% next year, and 10.1% in 2019. Presumably, these numbers don't fully reflect the likely big positive impact of a cut in the corporate tax rate next year."
The major averages reached their session highs following reports that Republicans had agreed to extend the child tax credit. Sources told CNBC that Republican Sen. Marco Rubio will support the tax bill after the tweaks.
There had been concerns about the tax bill passing this year, after Rubio said Thursday he would vote against the bill if the proposed child tax credit was not extended. Fellow Republican Sen. Mike Lee also said Thursday he was undecided on the GOP plan.
The major indexes were trading higher before the news about the senators broke, but closed lower on Thursday. The Dow also snapped a five-day winning streak.
Bob Corker, a Republican senator from Tenessee who originally opposed the bill, said Friday he would vote in favor of the measure.
"I think the bill is likely to pass, but if it doesn't, we could see a 5-to-10 percent decline in stocks," said Ed Keon, managing director and portfolio manager at QMA, the quantitative and dynamic asset allocation business of PGIM.
The Dow and S&P posted their fourth consecutive weekly gains, while the Nasdaq snapped a two-week slide.
In corporate news, shares of Hess jumped 2.3 percent after reports that Elliott Management is pushing for CEO John Hess to step down or for the company to sell all or part of its business.
Meanwhile, Costco shares rose 3.3 percent after the company reported better-than-expected quarterly earnings and sales.