By Chuck Mikolajczak
(Reuters) - Wall Street edged higher on Thursday, with the S&P 500 poised to close at a record on gains in McDonald's and healthcare names, while investors continued to hope President Donald Trump will be able to make progress on tax reform.
Shares in the world's biggest fast food chain (N:MCD) rose 2.36 percent, their biggest single-day percentage gain in more than two months, after Longbow Research upgraded the stock to "buy."
Financials (SPSY), up 0.03 percent, and the Russell 2000 index of smallcap stocks (RUT), up 0.17 percent, which are expected to be among the beneficiaries of a tax reduction, turned higher after trading lower in the early portion of the session.
But gains were tempered with equities at record highs and valuations elevated. The forward price-to-earnings ratio (P/E) on the S&P stood at 17.9 compared with its long-term average of 15.1 while the forward P/E on the Russell is 26.3 against an average of 21.3.
"The market is doing what it has been doing a lot of this year, it doesn’t surge to new levels, it just crawls to new levels," said Scott Wren, senior global equity strategist at Wells Fargo (NYSE:WFC) Investment Institute in St. Louis.
"People are comfortable owning stocks, but for us, these valuations are pretty stretched, especially for something like smallcaps."
U.S. Treasury Secretary Steven Mnuchin said Trump's proposal for a cut in the corporate income tax rate to 20 percent was "not negotiable."
The plan, which called for tax cuts for most Americans, also drew criticism for favoring business and the rich and potentially adding trillions of dollars to the deficit.
A Commerce Department report showed the economy grew a bit faster than previously estimated in the second quarter, but the momentum probably slowed in the third as Hurricanes Harvey and Irma temporarily curbed activity. The storms also pushed up initial claims for state unemployment benefits for the week, the Labor Department said.
The Dow Jones Industrial Average (DJI) rose 37.11 points, or 0.17 percent, to 22,377.82, the S&P 500 (SPX) gained 1.84 points, or 0.07 percent, to 2,508.88 and the Nasdaq Composite (IXIC) dropped 7.07 points, or 0.11 percent, to 6,446.19.
The healthcare index (SPXHC) led S&P gainers, rising by a third of a percent.
AbbVie (N:ABBV) was the biggest boost to the S&P, rising more than 5.6 percent after announcing a global resolution of intellectual property-related litigation with Amgen (O:AMGN).
Abbott (N:ABT) also rose almost 3 percent after the U.S. FDA approved the company's glucose monitoring device. The company also won U.S. antitrust approval to buy Alere Inc (N:ALR) on condition that it sell two point-of-care medical testing businesses.
Advancing issues outnumbered declining ones on the NYSE by a 1.22-to-1 ratio; on Nasdaq, a 1.33-to-1 ratio favored advancers.