Dow tops 20,000, global stocks at 19-month peak as Trump gloats over rally
The Dow Jones Industrial Average traded above 20,000 for the first time and world stocks hit 19-month highs on Wednesday on strong Japanese trade data, stellar European corporate results and investor enthusiasm over US President Donald Trump.
The president’s signing of numerous executive orders since his inauguration last Friday has reignited a rally that began after his election victory in November. Trump marked the milestone with a tweet: “Great!#Dow20K”.
Other U.S. benchmark stock indexes, including the S&P 500 and the Nasdaq Composite, also extended their post-election gains into record-high territory.
Investors said crossing the Dow 20,000 mark was just a number, but still nice to have.
“There are no magic numbers but we like to pretend that there are,” said Brian Jacobsen, chief portfolio strategist at Wells Fargo Asset Management in Menomonee Falls, Wisconsin.
The occasion was “like watching your odometer cross over 100,000 or peeking up at the clock and noticing that it’s exactly noon,” he said.
Thomas Roth, head of US Treasury Trading at MUFG Securities in New York, said the milestone reflects a belief that the pledge to cut taxes and regulation while stimulating the economy will be more business friendly and grow profits.
“While the Dow hitting 20,000 is one of the least meaningful data points on my screen, it does suggest that the equity rally is pretty broad-based,” said Michael Purves, chief global strategist at Weeden & Co in New York.
The Dow came within a point of 20,000 on January 6 as investors banked on pro-growth policies and tax cuts from the new Trump administration.
The renewed focus on Trump’s policies to reflate the US economy didn’t excite the bond and currency markets, however. US yields only inched up and the dollar fell across the board, particularly against a resurgent British pound.
MSCI’s global share index rose 0.68 per cent to 435.66 , its highest since June 2015.
Around midday, the Dow Jones Industrial Average rose 133.02 points, or 0.67 per cent, to 20,045.73, the S&P 500 gained 13.34 points, or 0.59 per cent, to 2,293.41 and the Nasdaq Composite added 38.47 points, or 0.69 per cent, to 5,639.43.
The post-election rally on Wall Street had tempered in recent days as investors fretted about the White House’s trade protection pronouncements.
The Dow’s move since November 22, when it first closed above 19,000, has been spearheaded by financial stocks, with Goldman Sachs and JPMorgan together accounting for about 20 per cent of the gain.
The two banks have benefited as investors bet Trump’s expected fiscal stimulus will trigger inflation and stoke a rise in interest rates.
In Europe, the FTSEurofirst 300 index of leading regional shares closed up 1.37 per cent. Germany’s DAX rose 1.8 per cent to a fresh 18-month high, while France’s CAC 40 Index rose 1 per cent.
Earlier in Tokyo, the Nikkei advanced 1.4 per cent, buoyed by data showing Japanese exports rose for the first time in 15 months in December, a positive sign for the economy even as talk of US protectionism clouds the outlook.
Global bond yields rose as Trump shifted his focus back to growth initiatives including a promise of corporate tax breaks to fuel US investment, after focusing on protectionism in his first few days in office.
The yield on the benchmark 10-year US Treasury note rose to 2.506 per cent, with prices falling 9/32.
European yields rose further. Germany’s 10-year Bund yield hit a six-week high of 0.39 per cent and France’s benchmark 10-year yield hit a one-year high of 0.97 per cent . Bond prices were weighed down by the rally in stocks and new debt supply.
In currencies, the dollar failed to carry on its upward momentum from Tuesday.
Lingering concerns about growing protectionism and the potential negative effects on global trade and growth remained close to the surface. In this environment, the outlook for the Federal Reserve is murky.
The dollar fell 0.15 per cent to 113.61 yen, and 0.36 per cent against a basket of currencies. The euro was up at US$1.0734, shrugging off a surprise fall in German business morale this month.
“The rally shows that markets have a degree of resilience” to political risks including elections in France and Germany and Britain’s departure from the European Union, said Andrzej Pioch, who helps oversee US$1.3 billion as a money manager at Legal & General Investment Management in London. “Attention is turning to data and away from politics.”