Wall Street is betting big on the U.S. economy, and it is showing in the S&P 500 today.
Some of the best performers in the index were Lennar, Sherwin-Williams, Ford Motor, General Motors and Paychex, all stocks that benefit from strong economic growth.
CNBC’s Carl Quintanilla flagged this phenomenon on Twitter:
Sherwin-Williams rose after releasing a strong revenue and sales outlook, while Lennar and Paychex jumped on stronger-than-expected quarterly results. Ford and GM, meanwhile, rose after both companies reported stronger-than-expected monthly auto sales.
The U.S. economy has started to pick up steam. U.S. economic output grew 3.1 percent in the second quarter, the Commerce Department said last week. And investors think that will only get better if Republicans are able to move forward with tax reform.
Last week, the GOP unveiled sweeping changes to the U.S. tax code. The proposed changes would lower the corporate tax rate to 20 percent from 35 percent.
“Without a question, lower taxes will benefit the bottom lines of most companies, and in general, smaller companies stand to benefit more than large companies,” said Nick Raich, CEO of The Earnings Scout, in a note to clients.
However, not everyone is convinced that tax reform will happen in the near future.
“We see only a 30 percent chance of meaningful tax reform over the next year,” said Nicholas Colas, co-founder of DataTrek Research, in a note. “Washington, like the country, seems too divided to come to an agreement on this complex issue.”
— With reporting by Carl Quintanilla.