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US markets closed higher; investors await clarity on tax plan

The US markets closed higher on Monday, after the Dow and the S&P 500 posted their first weekly drops in two months last week. The upside was capped however, as uncertainty continued to swirl around the state of Republican tax-cut legislation. The Senate bill differs from the House bill in significant ways, making delays likely as the two chambers work out their differences in conference committee. There is a chance that the House could pass the Senate's final bill and be done with it. Investors also continued to monitor President Donald Trump's 13-day visit to Asia.

Meanwhile, Philadelphia Fed President Patrick Harker said he has lightly penciled in a December rate hike, suggesting he had slightly less conviction about the policy decision than he had last month. Inflation, he said, continues to elicit caution about its weakness and also about the way in which it is measured. Harker added that price measures have drifted lower below the Fed's 2-percent target this year even while unemployment has fallen. The central bank has raised rates a notch twice in 2017 and expects to tighten again in mid-December, even while it continues to trim its nearly $4.5-trillion bond portfolio. Harker, a centrist voter on the Fed's monetary policy committee this year under an internal rotation, said the Fed must carry on since the economy is more or less at full strength and there remains very little slack in the labor market.

On the economy front, the federal government ran a budget deficit of $63 billion in October, the first month of fiscal 2018. The shortfall was $17 billion more than in the same month last year. Spending was up 12% in the month, while revenues rose 6%. Major drivers for higher spending in October included homeland security programs and education. Receipts of individual income and payroll taxes were 7% higher than in October 2016, a factor usually attributed to increases in wages and salaries. The first monthly budget figures of the new fiscal year come as President Donald Trump and congressional Republicans are pushing a major tax cut that congressional analysts say could add as much as $1.7 trillion to the deficit over 10 years. Senate rules, however, require tax legislation to stay within a tax cut of $1.5 trillion over a decade.

The Dow Jones Industrial Average added 17.49 points or 0.07 percent to 23,439.70, the Nasdaq gained 6.656 points or 0.10 percent to 6,757.60, and the S&P 500 edged higher by 2.54 points or 0.10 percent to 2,584.84.

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