Congress budget resolution revives tax overhaul hopes

The advance of US stock market and the US dollar index of ICE exchange accelerated last week as Congress passed a budget resolution. The SP 500 gained 1.2% and the ICE dollar index rose 0.8% for the week.

The SP 500 closed at record highs in a row first four sessions of the week as improving economic data boosted investor optimism. Data showed expansion in manufacturing and services sectors accelerated, as well as auto sales jumped and factory orders resumed growth in September. The US broad market lost 0.1% Friday as the mixed September jobs report wasn’t bad enough to alter the prospect of a Federal Reserve interest rate hike this December.

The ICE dollar index advanced 0.6% Monday as ISM manufacturing index jumped two points from 58.8 in August to 60.8 in September, the highest reading since 2004. It retreated next two sessions giving back part of Monday’s gains but rose 0.4% Thursday after Congress passed a $4.1 trillion budget, seen as a first step to enacting US tax code overhaul with tax cuts for businesses and individuals. The dollar slipped 0.01% on Friday as nonfarm payrolls fell 33 thousand in September after 169 thousand gain previous month. The decline was bigger than expected, the result of recent hurricanes. The unemployment rate fell to 4.2% from 4.4%, lowest since 2001.

Earnings season begins for major US banks this week. Economic events that are expected to have major impact on financial markets this week are: the UK manufacturing production Tuesday, Federal Open Market Committee meeting minutes on Wednesday, US producer price index Thursday, US retail sales and inflation report Friday. Improving inflation and stronger sales are expected to reinforce the December Fed rate hike likelihood.