The announcement of the Trump tax plan Wednesday afternoon had little effect on a stock market that earlier this week saw the tech-heavy Nasdaq break 6,000 for the first time and the Dow Jones industrial average flirt with 21,000.
Some of Trump’s tax plan had been mostly baked into the rising stock market, as was Wall Street’s ease over the first round of French presidential election, which indicated the country will likely elect a leader that will keep France in the European Union.
Chris Zaccarelli, chief investment officer at Cornerstone Financial Partners, said the market is also riding on unexpectedly strong earnings reports from U.S. companies as it takes in the politics at home and in France.
“The market saw the Trump plan and was interested in it, but until the market gets specific results, I don’t think it is going to act on it,” said Zaccarelli. “At the end of the day, until something gets passed, unless something comes to fruition, it’s a nonevent.
“Most of what you are seeing in the market is good earnings and a relatively strong economy,” Zaccarelli said. He said Friday’s report on gross domestic product will be closely watched by investors.
The Dow reacted mildly to the plan, dropping below 21,000 to settle at 20,975.09 on Wednesday. The Nasdaq Composite, which has been on a tear this year, finished the day virtually where it had started, at 6025.23. It broke the 6000 mark on Tuesday for the first time.
The Standard & Poor’s 500-stock index dropped a point to close at 2387.45. The small-cap Russell 2000, which could be among the greatest beneficiaries if the tax plan passes, was up 0.6 percent, at 1419.43.
Most of Nasdaq’s gains have come from five companies, with Apple, Amazon, Facebook, Alphabet and Microsoft together responsible for more than 41 percent of the market’s rise this year.
But there are other indications that technology is powering markets. Electric-carmaker Tesla, which has yet to turn a profit, is worth more than $50 billion, larger than Ford Motor Co. and running neck and neck with the most valuable U.S. car company, General Motors.
Stock prices also got a big boost on a mostly good start to the earnings season. Caterpillar, DuPont and McDonald’s all reported strong earnings this week. First-quarter earnings so far among S&P 500 companies are 6.8 percent above consensus estimates.
Trump’s tax plan calls for ending the alternative-minimum tax and the estate tax, and reducing the top rate for individuals from 39.6 percent to 35 percent. The president proposed dropping the number of tax brackets from seven to three. The two lower brackets would be 10 percent and 25 percent under the Trump plan. The corporate tax rate would be reduced to 15 percent from 35 percent now.
The most controversial proposal may be Trump’s call for repealing the deduction individuals may take on their federal tax form for their state and local taxes.
Europe and Asian markets were mostly up Wednesday. The Nikkei 225 was up more than 1 percent. The Hang Seng was up 0.5 percent. England’s FTSE 100 had risen a modest 0.2 percent.
Michael Farr, president of Farr, Miller & Washington, a D.C. investment firm, offered a note of caution amid the ebullience.
“To forget risk is increasing as prices rise is perilous,” Farr said.
“This is a bull market, and this is what bull markets do,” Farr said. “They embrace good news. They dismiss bad news. They don’t care about 59 missiles in Syria. They don’t care about U.S. troops off the coast of North Korea. They infer positive news from France. They like the news of big tax cuts, and they just go higher.”