Buoyed by renewed hope that President Trump will deliver on key campaign promises contributed to the Dow closing up triple digits on Thursday. The Nasdaq hit a new all-time high.
Market players were energized by the strong earnings being reported so far this earnings season. Also, there is renewed optimism that legislation to repeal Obamacare may have the votes to pass in the Senate and the House.
Word that tax reform may also be accomplished this year, as had been hoped, was just icing on the cake.
In recent weeks, optimism on Wall Street about President Trump’s ability to deliver on two of his campaign promises has waned. Those promises included repealing and replacing the Affordable Healthcare Act, and lowering taxes through tax reform.
Both measures are seen as being the catalysts needed to stimulate the economy. In fact, the stock market immediately showed its glee after Trump was elected in November on hopes that his financial plans would do wonders for businesses and consumers, and therefore the economy.
The Dow and Nasdaq began setting new all-time highs on a nearly daily basis. That includes surpassing the critical psychological 20,000 mark on the Dow Jones Industrial Average.
Giving it another try
In February, House Speaker Paul Ryan decided to not introduce a healthcare bill called the American Healthcare Act. It was meant to repeal and replace Obamacare, but Ryan didn’t introduce it when it became clear he would not be able to get enough votes from his own party.
The conservative Freedom Caucus managed to gather up enough support to thwart the effort.
On Wednesday, word came that leaders in the House had reached a compromise with members of the caucus. Sticking points over pre-existing conditions and insurance regulations may have been resolved.
On Thursday, President Trump said he hoped a deal could be reached next week. He said this as critics barked that the bill had no chance of being passed by the end of the month. April 28 is being reported as the target date.
If Trump’s hopes hold true, it will be a very busy week for the new administration, which is closing in on the end of its first 100 days. The infamous period could end on a very bad note if a funding bill to avoid a government shutdown is not passed by Congress. That deadline is also April 28.
The infamous period could end on a very bad note if a funding bill to avoid a government shutdown is not passed by Congress. That deadline is also April 28.
To delay or not delay
Also in the crosshairs is tax reform. If everything went as President Trump had wanted, by now Obamacare would have been repealed, and Congress would be working on tax reform.
The failure of the earlier healthcare bill to be introduced for a vote threw a monkey wrench in those plans, however.
It was only at the IMF conference this week that market players got some reassurance that tax reform was still on the table. It came from Treasury Secretary Steve Mnuchin. All he offered was that a plan would be introduced “very soon,” and that officials were working night and day on it.
“Whether health care gets done or health care doesn’t get done, we’re going to get tax reform done,” Mnuchin said.
Earnings to the rescue
Worried over the delay, and the mightier than thought challenges of these two issues, investors turned bearish, and the market sold off.
However, Thursday saw improvement, with the Dow closing up 174 points. The Nasdaq hit a new record high of 5,916.
In addition to the positive news out of Washington, the market is seeing strong earnings from companies that have reported so far. That includes financials, which are handily beating estimates on the top and bottom lines.
Now, we wait to see how everything goes next week. While not reaching a compromise over the healthcare bill may not cause quakes through the market, a government shutdown will definitely test the market’s resilience. may cause much more panic.