U.S. stocks rallied, the dollar extended gains and Treasuries slumped on speculation President Donald Trump’s tax-cut plan will become law this year. Gold sank.

The S&P 500 Index inched close to a record high as banks and tech shares surged on the prospect lower taxes will fuel economic growth. Small caps, a group with among the highest tax rates, jumped the most since March. The Bloomberg dollar index hit a six-week peak, and 10-year note yields climbed to the highest in two months. Gold fell below its 50-day average for the first time since July.

The urgent effort by Trump and Congressional Republicans to pass tax cuts they say will spur growth and investment drove investor demand for assets that will benefit from gains in the world’s largest economy. Coupled with Federal Reserve Chair Janet Yellen’s hawkish tone in remarks that boosted the chances for a December interest-rate hike, rumblings over the tax plan revived trades that gained favor following Trump’s stunning win almost a year ago.

“Tax reform will be crucial in both making America competitive again and possibly extending this aging economic recovery, but it won’t happen in a vacuum and interest rates are not going to sit idly by if growth and inflation truly respond to any fiscal boost,” Peter Boockvar, chief market analyst at The Lindsey Group, wrote in a note to clients.

The plan announcement is just the start of what’s expected to be a brutal fight in Congress, but equity investors were encouraged by several proposals, such as allowing companies to write off capital expenditures for five years. The dollar received a push from the prospect of capital inflows as companies take advantage of a proposed one-time repatriation tax.

“There’s the likelihood now that it may not be a tax reform, but we’ll likely get a tax cut, and the market likes a tax cut probably better than tax reform,” John Stoltzfus, chief market strategist at Oppenheimer & Co. in New York, said by phone. “Everybody likes a quick fix, and the market has shown for years it accepts kicking the can down the road.”

Source: Bloomberg

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