By Sinead Carew
NEW YORK (Reuters) - The Dow Jones Industrial Average broke the 24,000 mark for the first time on Thursday and other Wall Street indexes rallied on increasing indications the Republican party's push for a U.S. tax overhaul may get enough support to pass.
Republican U.S. Senator John McCain said he would back the tax bill, citing a boost to the economy, even though it was "far from perfect." Investors cheered McCain's support as his vote against Republican Obamacare repeal efforts was key to its collapse earlier this year
"I think the key driver today is the tax reform. We just heard Senator McCain come out and say he will be supporting the bill," said Mona Mahajan, U.S. Investment Strategist, Allianz Global Investors in New York. "There was some uncertainty around which way he would go this time."
The blue-chip Dow index has crossed four 1,000-point milestones this year on the back of strong corporate earnings, robust economic data and hopes for corporate tax cuts.
"The market is beginning to price in a higher certainty of tax reform happening and that is the big driver today," said Mark Heppenstall, chief investment officer at Penn Mutual Asset Management in Horsham, Pennsylvania.
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The market has priced in only a 20-percent to 40-percent probability of tax cuts, according to UBS strategists.
A reduction in corporate tax rate to 25 percent could boost S&P 500 earnings by 6.5 percent, UBS U.S. equity strategist Keith Parker estimated.
The Dow Jones Industrial Average rose 306.54 points, or 1.28 percent, to 24,247.22, the S&P 500 gained 21.35 points, or 0.81 percent, to 2,647.42 and the Nasdaq Composite added 48.85 points, or 0.72 percent, to 6,873.19.
In the previous day's session, Nasdaq had posted its biggest one-day drop in more than three months as investors rotated out of technology stocks.
The S&P and the Dow were set to post the eighth straight months of gains, while Nasdaq was on track to record five months of increases.
The S&P energy index <.SPNY> was rose 1.5 percent after OPEC agreed to extend oil production cuts to the end of 2018.
Industrials <.SPLRCI> rose 1.4 percent, helped by a 2-percent jump in transportation stocks <.DJT>, which would get a big boost from corporate tax cuts.
The S&P Financials sector <.SPSY> pared earlier gains but was still up 0.9 percent, boosted by expectations bank tax cuts would be passed on to investors in the form of share buybacks.
"That's why the stocks have moved so much. Investors are saying they're going to get these big dividends and buybacks," said Brian Klock, a managing director in equity research at Keefe, Bruyette & Woods in Boston.
Data that pointed to a sustained increase in underlying price pressures and a drop in first-time applications for unemployment benefits last week also helped sentiment.
Advancing issues outnumbered declining ones on the NYSE by a 1.54-to-1 ratio; on Nasdaq, a 1.24-to-1 ratio favoured advancers.
The S&P 500 posted 119 new 52-week highs and no new lows; the Nasdaq Composite recorded 164 new highs and 18 new lows.
(Additional reporting by Lewis Krauskopf in New York, Sruthi Shankar and Rama Venkat Raman in Bengaluru; Editing by Sriraj Kalluvila and Nick Zieminski)
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