MARKET REPORT

Small companies give stocks a lift

Trader Edward Landi works at the New York Stock Exchange, Wednesday, Dec. 13, 2017, in New York. The Federal Reserve makes a decision on interest rates today. (AP Photo/Mark Lennihan)
Trader Edward Landi works at the New York Stock Exchange, Wednesday, Dec. 13, 2017, in New York. The Federal Reserve makes a decision on interest rates today. (AP Photo/Mark Lennihan)

The major U.S. stock indexes finished mostly higher Wednesday, with small companies notching big gains as lawmakers in the House and Senate reached a deal on a tax-overhaul package.

The Dow Jones industrial average eked out its third record-high close in as many days, driven by a jump in Caterpillar. But a last-minute pullback in bank stocks left the Standard & Poor's 500 index slightly lower.

The S&P 500 index slipped 1.26 points, or 0.05 percent, to 2,662.85. The index closed at all-time highs on Monday and Tuesday.

The Dow gained 80.63 points, or 0.3 percent, to 24,585.43. The Nasdaq added 13.48 points, or 0.2 percent, to 6,875.80. The Russell 2000 index of smaller-company stocks picked up 8.33 points, or 0.6 percent, to 1,524.45.

Packaged-food and beverage stocks, health care companies and industrials accounted for much of the market's modest gains. Banks struggled as long-term bond yields edged lower, which makes it tougher for banks to earn money from lending.

The decline in financial stocks came even as the Federal Reserve raised its benchmark rate for the third time this year. The move, which was widely expected, came as the central bank noted that the U.S. economy was on sound footing.

"Widely expected. No big surprises. No big changes," said Tim Dreiling, regional investment director at U.S. Bank Wealth Management. "It's encouraging that they continue to see economic growth continuing into 2018, which aligns with our thinking."

Bond prices rose. The yield on the 10-year Treasury fell to 2.34 percent from 2.40 percent late Tuesday.

Trading got off to a subdued start Wednesday as investors waited for the afternoon policy update from the Fed.

As expected, the central bank raised the federal funds rate -- what banks charge one another for short-term loans -- by 0.25 percentage point to a still-low range of 1.25 to 1.5 percent.

Developments out of Washington put investors in the mood to buy small-company shares about two hours before the Fed's announcement.

Republican leadership in the House and Senate forged an agreement Wednesday on the GOP's planned overhaul of the nation's tax laws. The move paves the way for final votes next week to slash taxes for businesses and give many Americans modest tax cuts starting next year. Smaller companies stand to benefit most from a reduction in corporate tax rates because they tend to pay higher taxes than bigger corporations.

Packaged-food and beverage companies posted solid gains. Coca-Cola rose 61 cents, or 1.3 percent, to $45.90.

Health care stocks also rose. Incyte climbed $2.70, or 2.8 percent, to $98.10.

Caterpillar led the gainers among industrials stocks, adding $5.15, or 3.6 percent, to $148.57. The construction and mining equipment company was also the biggest gainer in the Dow.

Traders also bid up shares in Western Digital after the hard-drive-maker resolved a dispute with its partner Toshiba over Toshiba's plan to sell its flash memory business. Western Digital rose $1.86, or 2.3 percent, to $83.63.

Investors also welcomed some corporate deal news.

Finisar jumped 22.8 percent after Apple said it will invest $390 million in the fiber-optic component supplier so it can make more lasers used in facial recognition technology. Finisar increased $4.40 to $23.70.

Business on 12/14/2017

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