New York Investors' anticipation of a tax cut reignited the New Year's rally Monday on Wall Street, sending stocks barreling higher and lifting the Dow Jones industrials more than 170 points.
Wall Street expected President Bush, who's announcing an economic stimulus package today, to propose a cut in taxes on dividends to encourage more investment and give consumers more cash to spend.
"That is certain to be a big boost to the stock market," said Peter Cardillo, president and chief strategist of Global Partner Securities Inc.
The Dow closed up 171.88, or 2 percent, at 8,773.57. The Dow claimed its second triple-digit win in three sessions, having surged 265.89 Thursday on an unexpected jump in the manufacturing sector.
The first three days of 2003 have given the Dow its second-best start to a new year with a gain of 5.2 percent, according to Markethistory.com, a financial research Web site. The Dow had its best three-day New Year's rally in 1938 when it climbed 7 percent.
The broader market also rallied Monday. The Nasdaq composite index rose 34.24, or 2.5 percent, to 1,421.32. The Standard & Poor's 500 index advanced 20.42, or 2.3 percent, to 929.01.
Investors are hopeful Bush will propose a series of tax cuts that will pull the economy out of its doldrums and will help the market break its three-year losing streak. Bush is expected to propose reducing taxes paid by individuals as well as eliminating the taxation of investor dividends. The entire plan would amount to $600 billion in tax savings over 10 years.
"The investor will be able to capture all of that dividend and put more money in his pocketbook. It will be beneficial to the stock market as well as the economy," Cardillo said.
Conservative politicians and Wall Street have long criticized the so-called double taxation of dividends -- first with corporations paying corporate income taxes on the earnings it pays in dividends and then by investors paying taxes on the dividends they receive.
Stocks that pay dividends, particularly big-name blue chips, were among Monday's winners. IBM rose $1.94 to $83.59 and Exxon Mobil advanced 88 cents to $36.38.
Chip equipment makers contributed to the tech sector's gains following an upgrade by Deutsche Securities. Novellus soared $2.37 to $33.57 and Applied Materials climbed 88 cents to $15.41.
Other issues managed to rise despite negative news, an indication of how energized investors were feeling. Biogen advanced 45 cents to $41.85 after a downgrade from Salomon Smith Barney.
Analysts also credited Wall Street's advance to an upbeat outlook for fourth-quarter earnings, which companies begin releasing in earnest in two weeks.