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Wall Street was set to trade higher and propel the S&P 500 further into record territory, while the dollar was broadly stronger against its major rivals after the US Senate voted for a package of tax cuts at the weekend.

Investors anticipate that the House and Senate will this week begin a “conference” to resolve differences between their respective tax bills with the prospect of Donald Trump signing legislation before Christmas.

Equity futures suggest the S&P 500 will rise 0.6 per cent in opening trade, with the Dow Jones Industrial Average called up 0.9 per cent.

“The tax trade though has been back on since the House passed their tax plan in November and has accelerated again on the back of the Senate’s plan,” said Mike Bell, global market strategist at JPMorgan Asset Management.

“We estimate that the market is still only pricing in about a 50 per cent probability of tax cuts and that if a tax plan is finalised this would push US equities higher.”

Analysis from Wisdom Tree argued the market was expecting a 15 per cent marginal rate of corporate tax at the start of the year, but pointed out that “a flat rate of 20 per cent has now been proposed and appears more likely to be adopted”.

The exchange traded fund provider added that small and mid-cap companies were best placed to benefit.

“Given the nature of the tax proposals, companies with a bias towards domestic earnings . . . will benefit more from a shift to a 20 per cent marginal tax rate. It is estimated that the effective tax rate for companies of this size will decrease significantly, from close to 31 per cent to just over 20 per cent.”

The Russell 2000 index, which tracks such companies, has gained 5 per cent since mid-November and the S&P 500 has risen 3 per cent, while Congress has worked on tax reform. Financials and industrials have also outperformed the broad market, with these sectors viewed as benefiting from fiscal stimulus boosting the economy.

So far this year, the S&P 500 is up by 18 per cent and has embarked on its longest sustained run of consecutive record-breaking closing readings on record. The Dow Jones Industrial Average is up by 22 per cent, trading over 24,000 points for the first time.

The index tracking the world’s reserve currency was up 0.5 per cent to 93.332 as the euro dipped 0.4 per cent to $1.8360. The pound was 0.3 per cent lower at $1.3429.

The yield on the 10-year Treasury note rose 4 basis points to 2.41 per cent, up from an intraday low of 2.32 per cent on Friday, when risk assets were briefly sold on the news that the White House’s former national security adviser, Michael Flynn, will plead guilty to charges that he lied to the FBI about contact with the Russian ambassador.

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