US Markets

Stocks close higher as some companies pledge to spend tax bill savings on higher wages

Key Points
  • NBCUniversal and CNBC parent Comcast, as well as Boeing AT&T and Wells Fargo, announced higher pay and bonuses for workers.
  • The Dow, S&P 500 and Nasdaq closed just below record highs set earlier this week.

U.S. stocks finished higher on Thursday after some companies said they would spend the savings stemming from lower corporate taxes on higher wages and new construction.

The Dow Jones industrial average rose 55.64 points to close at 24,782.29. At its session highs, it traded more than 100 points higher.

The gained 0.2 percent to 2,684.57, with financials and energy rising 0.9 percent and 2.1 percent, respectively. Energy is also on track to post its biggest one-week gain in more than a year.

The Nasdaq composite closed just above the flatline at 6,965.36.

NBCUniversal and CNBC parent Comcast, as well as Boeing, AT&T and Wells Fargo, announced higher pay and bonuses for workers. They also announced other spending measures. Comcast, AT&T and Wells Fargo shares climbed, while Boeing's stock slipped.

"These are really big companies that will definitely benefit from a lower tax rate," said Adrian Day, CEO of Adrian Day Asset Management. "There is real hope that the tax cuts will boost the economy, which is what they were intended to do."

Traders work on the floor of the New York Stock Exchange
Spencer Platt | Getty Images

House members voted on Wednesday to pass a bill that would cut the corporate tax rate to 21 percent from 35 percent. The Senate had already passed the measure on Tuesday. President Donald Trump is widely expected to sign the bill, giving him and the Republican party a major legislative victory.

Equities have risen sharply this year with investors betting on lower corporate taxes. The S&P 500 is up 19.9 percent in 2017.

Alberto Gallo, partner at Algebris Investments, said in a note that the tax cuts "will support growth in 2018, acting as a tailwind to both consumption and capital spending."

"Tax reform may also incentivize capital spending, which gradually recovered from the lows of 2015 when profits of commodity and exporting companies were squeezed by a stronger dollar and weaker prices."

The major indexes remained close to record highs on Thursday. The Dow was just 0.4 percent below a record set Monday. The S&P 500 and Nasdaq closed 0.4 percent and 0.6 percent, respectively, below their all-time highs.

"The seasonal Santa Claus rally is at hand, and we think it will help prevent a pullback before year-end. Our sentiment readings are not yet sending a collective warning, and breakouts continue to outnumber breakdowns," said Katie Stockton, chief technical strategist at BTIG.

In corporate news Thursday, Discovery Communications shares climbed 4.4 percent after Bank of America Merrill Lynch upgraded the stock to buy from neutral and raised its price target to $30 from $26.

PG&E Corp., meanwhile, pulled back 12.95 percent after the electric company suspended its dividend. The company also warned it could be held liable for the wildfires in northern California from earlier this year.