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Stocks rise; small companies make the biggest gains

Stocks rise; small companies make the biggest gains
The Dow Jones industrial average rose 56.39 points, or 0.3%, to 22,340.71 on Wednesday. Above, a Wall Street subway station in New York. (Mark Lennihan / Associated Press)

U.S. stocks climbed Wednesday as smaller companies soared after a report that showed business investment climbed in August. Investors also hoped stocks will benefit from tax cuts proposed by President Trump and congressional Republicans.

The Labor Department said orders for long-lasting manufactured goods rose, and a gauge of business investment climbed for the second month in a row. Investors hope that means U.S. manufacturing is getting stronger as the global economy continues to improve, and they bet on continued growth. Technology companies rallied for a second day, while the prices of traditionally safe investments such as bonds and gold dropped.

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"We've been waiting for that," Kate Warne, an investment strategist for Edward Jones, said of the recent improvement. "Business spending has been relatively weak," with spending by consumers keeping the economy afloat.

Smaller, domestically focused banks and technology and industrial firms made especially large gains, and the Russell 2000 index of smaller-company stocks recorded its biggest gain since March. The tax proposal was similar to what investors had come to expect, and with months of negotiations likely ahead and key details missing, it's not clear what kind of plan might ultimately pass. But lower corporate taxes could help smaller companies more than large ones.

"A corporate tax cut tends to be better news for smaller companies because they don't have as many ways to reduce their tax rate," Warne said.

The Standard & Poor's 500 index rose 10.20 points, or 0.4%, to 2,507.04. The Dow Jones industrial average rose 56.39 points, or 0.3%, to 22,340.71. The Nasdaq composite leaped 73.10 points, or 1.2%, to 6,453.26.

The Russell 2000 did even better and continued to set records. It jumped 27.95 points, or 1.9%, to 1,484.81. After a sluggish few months, the index has rose more than 9% since mid-August. The S&P mid-cap and small-cap indexes also climbed.

The Labor Department's report gave investors hope the economy will keep growing, and Wall Street bet interest rates will keep rising. The yield on the 10-year Treasury note climbed to 2.30% from 2.24%.

That helped banks, as higher interest rates mean banks can charge more to lend money. Bank of America shares rose 2.4% to $25.41. Citigroup ticked up 1.9% to $72.28.

Companies that pay big dividends took steep losses. Kimco Realty, a real estate investment trust that owns outdoor shopping centers, slid 3.7% to $19.41. Household products maker Procter & Gamble fell 1.9% to $90.87. Rising bond yields made government bonds a more appealing investment to investors seeking income.

The dollar grew stronger, rising to 112.75 yen from 112.17 yen. The euro fell to $1.1756 from $1.1798.

Micron Technology jumped 8.5% to $37.09 after the chipmaker had a better quarter than investors expected. Facebook climbed 2.1% to $167.68. Google's parent company, Alphabet, advanced 2.4% to $959.90.

Nike fell 1.9% to $52.67 after the maker of shoes and athletic gear said sales in the U.S. remained weak in its first fiscal quarter and steep discounts continued to affect its business. Although its earnings and revenue were better than analysts expected, analysts chalked much of that up to lower taxes, stock repurchases, and spending cuts.

Utility company Scana dropped 7.8% to a two-year low of $51.22 after state police in South Carolina said they are looking into "potential criminality" by the company in connection with a nuclear plant construction project that was shut down after some $10 billion was already spent. Its South Carolina Electric & Gas unit and partner Santee Cooper canceled the project in July after contractor Westinghouse filed for bankruptcy. Scana said it will cooperate fully with the inquiry.

Gold fell to its lowest in a month. The metal's price declined $13.90, or 1.1%, to $1,287.80 an ounce. Two weeks ago gold was at a 12-month high, but it has fallen sharply since then. Silver fell 6 cents to $16.83 an ounce. Copper rose 1 cent to $2.93 a pound.

Benchmark U.S. crude rose 26 cents to $52.14 a barrel in New York. Brent crude, the standard for international oil prices, fell 54 cents to $57.90 a barrel in London.

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Wholesale gasoline fell 4 cents to $1.65 a gallon. Heating oil stayed at $1.85 a gallon. Natural gas rose 6 cents to $2.97 per 1,000 cubic feet.

The FTSE 100 index in Britain and Germany's DAX each advanced 0.4%. The CAC 40 in France rose 0.3%. Japan's Nikkei 225 fell 0.3%, and South Korea's Kospi slipped less than 0.1%. Hong Kong's Hang Seng index rose 0.5%.

UPDATES:

2:10 p.m.: This article was updated with closing prices, context and analyst comment.

This article was originally published at 10:55 a.m.

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