After cracking 23,000 for the first time on Tuesday, the blue chip Dow Jones Industrial Average will look to build off a record close and finish above the new milestone for the first time on Wednesday.
Boosted by a 5% post-earnings rally from UnitedHealth (UNH), the Dow led the major indexes on Tuesday as the tech-heavy Nasdaq was a laggard, finishing marginally in the red.
Wall Street will keep a close eye on American Express and eBay’s results for any signs about the health of the U.S. consumer.
The economic calendar won’t be too busy on Wednesday with the expected highlight set to come from the Federal Reserve’s latest Beige Book out in the afternoon. This report is a collection of economic anecdotes from each of the Fed’s 12 districts.
Also on the economic calendar will be the September readings on housing starts and building permits.
Corporate America moving on from tax reform
The Trump administration’s push to get tax reform done has defined the business climate in 2017.
Except that the corporate sector may finally stop holding their breath.
On Goldman Sachs’ (GS) third quarter earnings call on Tuesday, the firm’s CFO Marty Chavez was asked about the impact that the potential for tax reform is having on clients. And it may be less than you might think.
“[Tax reform] is certainly a part of our engagement with clients,” Chavez said. “I will also note, however, that clients, it seems to us, have moved towards saying tax reform would be a good thing, but it’s not stopping us from considering strategic acquisitions and sales right now.”
And so in short, Chavez paints tax reform as something like a bonus that could complement corporate America’s focus on growing and improving their existing businesses, but not a necessary or expected boost.
Which stands somewhat in contrast to comments we heard earlier this month from none other than Warren Buffett. In an interview earlier this month Buffett indicated that the opposite thinking has inundated in corporate America and has even shaped his approach at Berkshire Hathaway (BRK-A, BRK-B).
Buffett said that, “We may or may not have a change in the tax code… We have lots of stocks with lots of gains, we have a few stocks with losses and here we are, in October, and if something happens that changes the tax rate on January 1…it would pay me to sell the losses now and defer the gains until next year. And I think there’s a lot of that going on.”
Buffett added that, “I think there’s an expectation that [if Congress] has a tax act they will cut rates, certainly corporate rates, and it’d be kind of foolish to have a gain now and pay 35% tax on it when if by waiting a few months you’d have a 20% rate on it.”
In other words, there are a lot of potential stock sellers and dealmakers waiting on the sidelines for clarity on taxes. This paints a market-negative picture at least for equity markets where investors might be holding winners longer than they otherwise would, and outlines a cautious dealmaking environment given the uncertainty around taxes.
On Tuesday, Chavez’s former colleague at Goldman Sachs and currently Trump’s top economic advisor Gary Cohn told Yahoo Finance that “everything is on the table” when it comes to what elements might be part of a final tax reform bill.
And with just about 10 weeks left in 2017 — and even fewer remaining on the Congressional calendar — it seems clear that tax reform is a question not likely to be answered this year. And corporate America has things to do.
Myles Udland is a writer at Yahoo Finance. Follow him on Twitter @MylesUdland
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