U.S. tax plan hopes lift stocks, dollar strengthens

By Chuck Mikolajczak

NEW YORK (Reuters) - World stocks advanced, bond yields rose and the U.S. dollar strengthened on Friday on increased hopes President Donald Trump could make progress on his fiscal plans after the U.S. Senate approved a budget blueprint that paves the way for tax cuts.

U.S. Republican Senator Rand Paul appeared to back the administration's sweeping tax cut plan, saying he was "all in" for massive tax cuts, even as the Senate passed a key budget measure without his support one day earlier.

Equities rose on Wall Street, with financials <.SPSY>, which are expected to benefit from the administration's proposed policies, up 1.16 percent as the best performer of 11 major S&P sectors.

 

"It's just a reaction to the thought that just maybe there might be something coming from Congress in the way of tax reform," said Paul Nolte, portfolio manager at Kingsview Asset Management in Chicago.

"Everybody had kind of given up hope, and after the comments over the last 24 hours, people are like, shoot, this may actually happen."

Housing stocks <.HGX> also moved higher, up 0.70 percent, after data from the National Association of Realtors showed U.S. home resales unexpectedly increased in September.

But gains were curbed by declines in Celgene , off 10.76 percent after the company said it would abandon drug trials for a Crohn's disease treatment.

The Dow Jones Industrial Average <.DJI> rose 165.59 points, or 0.71 percent, to 23,328.63, the S&P 500 <.SPX> gained 13.1 points, or 0.51 percent, to 2,575.2 and the Nasdaq Composite <.IXIC> added 23.99 points, or 0.36 percent, to 6,629.05.

For the week, the Dow climbed 2 percent, the S&P gained 0.9 percent and the Nasdaq gained 0.4 percent.

The dollar index <.DXY>, tracking the greenback against a basket of major currencies, rose 0.49 percent, its biggest daily gain in a month, with the euro > down 0.69 percent to $1.1768.

Bets that Trump's planned tax cuts, infrastructure spending and other pro-business measures would push up growth and inflation had been behind a reflation trade that propelled the dollar to 14-year highs earlier this year.

European shares rebounded from their worst day in two months, also helped by well-received earnings reports for Volvo and Ericsson and high German producer-price inflation numbers.

The pan-European FTSEurofirst 300 index <.FTEU3> rose 0.24 percent. MSCI's world equity index <.MIWD00000PUS>, which tracks shares in 47 countries, gained 0.09 percent, just shy of a record intraday high.

The Senate budget resolution also sent U.S. Treasury yields higher, with two-year yields reaching a near nine-year high, as investors reduced bond holdings on worries about more inflation and federal borrowing.

Benchmark 10-year notes > were last down fell 18/32 in price to yield 2.3845 percent, from 2.321 percent late on Thursday.

The increased risk appetite also sent gold lower. Spot gold > dropped 0.7 percent to $1,280.65 an ounce. U.S. gold futures fell 0.60 percent to $1,282.30 an ounce.

U.S. crude settled up 0.35 percent at $51.47 per barrel and Brent was last at $57.75, up 0.91 percent on the day, ending the week up on support from a sharp decline in Iraqi crude exports due to tensions in the Kurdistan region after contending with weak demand data.

(Additional reporting by Caroline Valetkevitch; Editing by James Dalgleish and Nick Zieminski)