By Joyce Yu
Philadelphia, PA–US stocks opened lower following a rally yesterday as investors are considering the implication of the tax reform unveiled by President Trump.
”President Trump’s tax proposals have better chance of implementation and will help underpin earnings growth and help the US recovery push into 2018,” the Financial Times quoted Neil MacKinnon at VTB.
Trump on Wednesday proposed the highly anticipated tax cut plans which include lowering the corporate income tax rate to 20 percent and implementing a new 25 percent tax rate for pass-through businesses such as partnerships to boost the economy. This is the biggest U.S. tax overhaul in three decades.
But further details on how the tax cuts would be paid for without increasing the budget deficit and national debt have yet been disclosed.
“Financial markets have reacted positively, which is not unexpected given the proposed benefits to larger companies,” said Paul Donovan, global chief economist at UBS Wealth Management.
But he’s not confident the proposals will become law.
The Nasdaq rose 1.2% on Wednesday after the tax plans were revealed. The S&P 500 hit an all-time record.
US economy expanded at a 3.1% annual rate in the second quarter, up from the 3.0% pace of growth the Commerce Department reported last month, said in its third estimate on Thursday. This is the quickest pace in more than two years.
US economy grew 1.2% in the January-March period, while the market had expected that second-quarter GDP growth would be unrevised at a 3.0 percent rate.
Growth momentum in the third quarter, however, probably slowed due to damages caused by Hurricanes Harvey and Irma.
Retail sales, industrial production, homebuilding and home sales declined in August as a result of Harvey which struck Texas. Further weakness is anticipated in September after Irma slammed into Florida early this month.
Rebuilding is, on the other hand, expected to boost growth in the fourth quarter and in early 2018.
Faster GDP growth in the second quarter bolstered the growth in first half to 2.1%, but economists still believe 2017’s growth may miss Trump’s ambitious 3.0% target.
European and Asian markets were mixed. Japanese Prime Minister Shinzo Abe officially dissolved parliament overnight, paving the way for the Oct. 22 snap election.
