por admin » Mié Mar 01, 2017 1:05 pm
Dow Surges 300 Points to Top 21000 for First Time
Milestone comes after Trump strikes an optimistic tone in his speech and as Fed officials hint at higher interest rates
By Christopher Whittall and Aaron Kuriloff Updated March 1, 2017 12:20 p.m. ET
The Dow Jones Industrial Average surged above 21000 for the first time Wednesday, as investors embraced optimism from President Donald Trump and Federal Reserve officials.
Stocks have been soaring since Election Day, with the Dow industrials surpassing 19000, 20000 and now 21000.
The blue-chip index was up more than 300 points, rising 1.5% to 21123. The S&P 500 gained 1.5%, and the Nasdaq Composite added 1.4%, following gains in Asia and Europe.
If the Dow holds its gains through the closing bell, it will tie the fastest thousand-point jump in history: It took 24 sessions from the first close above 10000 for the index to climb to 11000 in 1999.
The latest milestone came after Mr. Trump struck an optimistic tone in a speech to Congress on Tuesday evening, although he offered few new details for his agenda. Investors were also focused on the likelihood of the Fed raising interest rates in March, following comments from a number of officials suggesting another quarter-point interest rate increase could come at the central bank’s next meeting.
“The market woke up this morning believing in Trump’s ability to enact a pro-business agenda,” said Tom Wright, director of equities at JMP Securities. “The trend has been up, because of underlying optimism, but it’s been tempered by concern they may not be able to get that agenda through Congress.”
Fed-fund futures, used by investors to place bets on central bank policy, showed a roughly 66% chance of a rate rise in March, up from 35% Tuesday, according to CME Group.
Trader Ryan Falvey, center, and specialist John O'Hara work on the floor of the New York Stock Exchange on March 1, 2017.
Trader Ryan Falvey, center, and specialist John O'Hara work on the floor of the New York Stock Exchange on March 1, 2017. Photo: Richard Drew/Associated Press
Investors ditched U.S. government bonds and bought the dollar. The WSJ Dollar Index, which tracks the U.S. currency against 16 others, was recently up 0.3%. The yield on the benchmark 10-year Treasury note rose to 2.462%, according to Tradeweb, from 2.358% Tuesday. Yields rise as prices fall.
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The Dow Jones Industrial Average crossed 21000 for the first time Wednesday morning. WSJ's Paul Vigna and Tanya Rivero discuss the market's response to President Trump's policies and what still concerns traders about the U.S. economy. Photo: Getty
New York Fed President William Dudley, a close ally of Fed Chairwoman Janet Yellen, on Tuesday said the case for raising rates “has become a lot more compelling” in light of the economy’s current and expected performance. San Francisco Fed President John Williams also said in a speech Tuesday that a rate increase at the central bank’s meeting in March was “very much on the table for serious consideration.”
As bond yields rose, bank stocks surged. Financial shares in the S&P 500 rose 2.7%, leading gains. Bank of America rose 3.5%, and Morgan Stanley added 2.4%.
Higher interest rates tend to boost the profitability of banks’ lending activities.
Investors remain concerned about some aspects of the rally, including that shares are more expensive than their historical averages by some measures. Companies in the S&P 500 traded Tuesday at an average of roughly 22 times their last 12 months of earnings, above their 10-year average of around 16, according to FactSet.
Major indexes could still push higher.
A measure of investor sentiment from Bank of America Merrill Lynch reached a 16-month high in February, but remained below levels hit as the market bottomed in March 2009. When the indicator has been as low or lower, total returns over the next 12 months have been positive 94% of the time, according to the firm’s analysis.
Still, the steady gains, without a substantial pullback, have some analysts wary. Investors have bought into postelection dips and the S&P 500 hasn’t declined 1% or more in a day since October.
“I’m usually pretty bullish, but I’m worried there’s too many people who have joined the party,” said Tom Digenan, head of U.S. equities at UBS Global Asset Management.
The prospect of higher U.S. rates rippled across to Europe, pulling local government bond yields higher across the board. The Stoxx Europe 600 rose 1.5%, with bank shares adding 3%.
“The bond market doesn’t look great over the next 12 to 18 months. It looks like the Fed is committed to a path of normalization,” said Bob Michele, head of the global fixed income, currencies and commodities group at J.P. Morgan Asset Management. “We see growth and inflationary pressures picking up globally.”
In Asia, a weakening yen helped Japan’s Nikkei Stock Average close up 1.4%. The dollar was recently up 0.8% at ¥113.652, helping to lift Japanese companies that sell goods abroad.
—Corrie Driebusch contributed to this article.