Stock exchange upbeat on tax-cut expectations
Stock exchange in New York rises in early trading as traders expect Senate to extend Bush tax cuts.
NEW YORK — Expectations that the Senate will vote to extend tax cuts helped fuel early gains on the New York Stock Exchange Monday. Treasury bond yields rose to their highest levels since June.
If enacted, the package will extend tax cuts passed during the Bush administration for all income levels for another two years. It will also extend unemployment benefits and put in place a one-year reduction in Social Security taxes.
Economists expect the nearly $900 billion tax package to boost economic growth and increase the size of the budget deficit. House Democrats have pledged to not support the measure unless tax rates rise for the nation's wealthiest estates.
In early trading, the Dow Jones industrial average rose 8.86, or 0.1 percent, to 11,419.18.
The Standard and Poor's 500 index rose 1.91, or 0.2 percent, to 1,242.31. The S&P 500 closed Friday at 1,240.40, the third straight day that it reached a new high for the year.
The Nasdaq composite index fell 0.3, or less than 0.1 percent, to 2,637.23.
The tax plan has crushed the prices of Treasury bonds since it was announced last week. The yield of 10-year Treasurys rose to 3.36 percent, up from 3.33 percent late Friday. The bond yielded 2.4 percent in mid-October. Bond prices move in the opposite direction of their yields.
"It looks like the big trade going on right now is that money is working its way out of bonds and into stocks," said Ryan Detrick, a senior strategist at Schaeffer's Investment Research. "We think that is only going to continue as the economy starts looking better."
In corporate news, Hewlett-Packard Co. fell 2.0 percent to $41.74 in early trading after Goldman Sachs gave the hardware company a sell rating. Goldman's analysts see tablet computers, such as Apple Inc.'s iPad, taking business away from PCs.
General Electric fell 0.7 percent to $41.58 after it announced that it will buy Wellstream Holdings PLC, a British manufacturer of products for the oil industry, for $1.3 billion.
There are no major economic reports or corporate earnings announcements scheduled for Monday.