September 10, 2018 / 5:04 PM / 7 months ago

US STOCKS-S&P, Nasdaq edge higher on tax optimism despite Apple drag

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* Republicans to unveil new round of tax cuts this week

* Apple drops after saying tariffs would hit many of its products

* Nike gains as Labor Day sales ease fears of demand hit

* Hurricane Florence looms over insurers, which weigh on Dow

* Dow down 0.12 pct, S&P up 0.21 pct, Nasdaq up 0.14 pct (Adds comments, updates to early afternoon)

By Shreyashi Sanyal

Sept 10 (Reuters) - The benchmark S&P 500 and the Nasdaq edged higher on Monday, lead by industrial stocks, on optimism for further tax relief, although a drop in Apple kept gains in check.

Republicans in the U.S. House of Representatives plan to unveil tax cuts this week, intended to augment President Donald Trump’s 2017 tax overhaul that added $1.5 trillion to the federal deficit through permanent tax cuts for U.S. companies.

“Investors are definitely happy and they are reading into the potential of a future tax cut in the short term,” said Matt Watson, portfolio manager for James Advantage Funds in Alpha, Ohio.

Ten of the 11 major S&P sectors were higher, led by a 0.64 percent increase in the industrials sector.

“At this point the markets are able to shrug off the trade-related headlines because after a down week we are just seeing markets turning back to fundamentals,” said Jamie Lavin, global investment specialist at J.P. Morgan Private Bank in Dallas, Texas.

Trump said on Friday he was ready to levy additional taxes on practically all Chinese imports, threatening duties on $267 billion of goods over and above planned tariffs on $200 billion of Chinese products. China said it will respond if Washington takes any new steps on trade.

A number of companies said the proposed tariffs would weigh on business. Apple said a “wide range” of its products would be hit, although it did not mention the iPhone.

Apple shares dropped 1.8 percent, giving up their premarket gains and weighing on the three major indexes.

At 12:48 a.m. ET the Dow Jones Industrial Average was down 30.92 points, or 0.12 percent, at 25,885.62, the S&P 500 was up 6.08 points, or 0.21 percent, at 2,877.76 and the Nasdaq Composite was up 11.12 points, or 0.14 percent, at 7,913.66.

Dragging down the Dow were insurers Travelers, which fell 1.8 percent, and UnitedHealth, which dropped 2.7 percent, after forecasters said Hurricane Florence is “expected to become a major hurricane very soon” as it bore down on the U.S. East Coast.

At the other end of the Dow was Nike, which rose 1.9 percent after a report said the footwear maker’s Labor day sales rose, easing concerns about the hit to demand after the Colin Kaepernick advertisement.

The energy sector rose 0.32 percent as oil prices climbed after U.S. drilling stalled and investors anticipated lower supply once new U.S. sanctions against Iran’s crude exports kick in from November.

Tesla rose 5.9 percent after brokerages Baird and Bernstein said the electric carmaker was on track to be profitable and cash flow positive in the second half of the year.

Alibaba dropped 3.9 percent after the company said Jack Ma will step down as chairman in one year, passing on the reins to trusted lieutenant, Chief Executive Officer Daniel Zhang.

Advancing issues outnumbered decliners for a 1.57-to-1 ratio on the NYSE and a 1.06-to-1 ratio on the Nasdaq.

The S&P index recorded 40 new 52-week highs and five new lows, while the Nasdaq recorded 84 new highs and 55 new lows. (Reporting by Shreyashi Sanyal in Bengaluru; Editing by Shounak Dasgupta)

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