U.S. equities pushed higher on Wednesday, shrugging of early-session and mid-day excursions into the red, as President Donald Trump kicked off his tax reform push with a speech outlining broad principles. These include tax code simplification, a lowering of rates, relief for middle-class families, and a way to encourage repatriation of foreign-held corporate cash.
Investors cheered — as fears of the North Korean missile launch earlier this week faded — ahead of the critical non-farm payrolls report on Friday.
In the end, the Dow Jones Industrial Average gained 0.1%, the S&P 500 gained 0.5%, the Nasdaq Composite gained 1.1% and the Russell 2000 gained 0.6%. Treasury bonds weakened, the dollar was stronger, gold lost 0.4% and oil fell 1.0% amid an ongoing focus on Hurricane Harvey’s impact on energy infrastructure in Texas and Louisiana.
Breadth was positive with 1.7 advancers for every declining issue amid ongoing softness in trading activity, at just 83.6% of the NYSE’s 30-day average volume. Technology stocks led the way with a 0.8% gain while telecoms were the laggards, down 0.6%.
AeroVironment, Inc. (NASDAQ:AVAV) surged 18.2% after reporting better-than-expected quarterly results with product revenue up nearly 100% on demand for small aerial drones. Incyte Corporation (NASDAQ:INCY) gained 10.6% amid broad buying pressure in biotechs in the wake of the Kite Pharma Inc (NASDAQ:KITE) acquisition and the FDA approval of a near-$500,000 per treatment cancer drug.
On the economic front, the ADP private payrolls report increased 237k in August following a 201k gain in July. For Friday’s key jobs report, the last before the Federal Reserve decides whether or not to start “quantitative tightening” on its bloated $4.4 trillion balance sheet, analysts are looking for a 180k payroll gain with the unemployment rate holding steady at 4.3%.
Still, ADP highlighted that the government’s jobs report has often been very weak in August due to seasonality and measurement problems. So watch for that.
Click to Enlarge Big Tech and biotech stocks ruled the day, pushing the Nasdaq 100 up and out of relatively gutless two-month downtrend after finding support near its 50-day moving average. The Nasdaq is now up nearly 3% from Tuesday’s lows, the largest upward swing since the election.
The bulls also managed to push the S&P 500 back up and over its 50-day moving average.
The Takeaway: Stocks have returned to a neutral footing as the calendar prepares to flip to September, historically one of the worst months of the year spiked with a number of major headwinds (debt ceiling, taxes, the Fed, the iPhone 8 launch, and more).
Check out Serge Berger’s Trade of the Day for Aug. 31.
Today’s Trading Landscape
To see a list of the companies reporting earnings today, click here.
For a list of this week’s economic reports due out, click here.
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