Stocks moved higher as several large companies pledged to spend tax cut savings on higher wages and capital improvements. The Dow was up 55 points on flat volume to close at 24,782. Sector rotation out of tech and into banks and material and media stocks continues.
TechNet, a tech trade group that represents 75 tech big companies released a statement regarding the new tax bill. TechNet CEO Linda “Cloud” Moore said: “The final tax reform bill is strong in the key areas that encourage innovation and entrepreneurship and create jobs in America”. While she drinks the bubbly however Vox’s Dylan “Dee-Mat” Matthew’s disagrees and thinks the big tech companies will simply reward shareholders and not invest in plant property and equipment. He cites the 2004 attempt to repatriate overseas funds as an example.
As mentioned yesterday in the blip, several big companies responded positively to the passage of the bill. Boeing announced $300 million in charitable donations and pay raises, AT&T announced a $1,000 bonus for every one of its 200,000 employees. Wells Fargo announced an 11% increase in its minimum wage moving it up from $13 an hour to $15 an hour and Comcast also announced wage increases. While it is hoped and urged that the tax bills savings will be spent on wages, jobs and investment, there is no mandate to do so meaning that shareholders will also get some of the gravy. With a tight labor market the tax cuts could make it easier for companies to raise wages and retain talent.
Today's final GDP report for the third quarter had real economic growth at a 3.2% annual rate, slightly below consensus expectations, but still the fastest growth in more than 2 years and the second consecutive quarter of 3%+ real growth. The slight downward revision was due to personal consumption, which grew 2.2% in the third quarter versus a prior estimate of 2.3%. In housing news the FHFA index showed home prices were up 6.6% yoy and gurus like Brian Wesbury at First Trust (honorary Westport Mafia member) expect that with wage growth showing signs of acceleration, the housing markets will continue to make gains in 2018 especially in states with low or no income taxes.