Dow Jones closes over 20,000 for first time ever in Trump-inspired rally

The Donald Trump rally is reignited by solid corporate earnings, investor optimism

PUBLISHED : Thursday, 26 January, 2017, 5:13am
UPDATED : Thursday, 26 January, 2017, 8:26am

The Dow Jones Industrial Average closed atop the 20,000 mark for the first time ever as solid earnings and optimism over President Donald Trump’s pro-growth initiatives revitalised a post-election rally.

Trump has made several business-friendly decisions since taking office on Friday, including signing executive orders to reduce regulatory burden on domestic manufacturers and clearing the way for the construction of two oil pipelines.

The S&P 500 and the Nasdaq Composite indexes also closed at record highs for a second consecutive session.

The Dow came within a point of the historic mark on January 6, as investors banked on pro-growth policies and tax cuts many expect from the new administration. However, the index had struggled in recent weeks as investors awaited clarity on the new administration’s policies grew cautious.

“It was definitely a milestone that the market has been focused on for really the better part of two months and you were starting to get a little bit of anxiety as to whether it was going to be surmounted or not,” said Julian Emanuel, equity strategist at UBS in New York.

“We are particularly encouraged to see financials acting well again because they have been the leadership.”

Dow tops 20,000, global stocks at 19-month peak as Trump gloats over rally

The Dow Jones Industrial Average rose 155.38 points, or 0.78 per cent, to finish at 20,068.09, the S&P 500 gained 18.33 points, or 0.80 per cent, to close at 2,298.4 and the Nasdaq Composite added 55.38 points, or 0.99 per cent, to settle at 5,656.34.

Trump marked the moment with a tweet from the official account of the office: “Great!#Dow20K”.

Sentiment was also lifted by better-than-expected fourth-quarter earnings. Of the 104 S&P 500 companies that have reported results through Wednesday morning, nearly 70 per cent have beaten expectations, according to Thomson Reuters I/B/E/S. Earnings are expected to show growth of 6.8 per cent for the quarter, the strongest in two years.

The 42-session surge from the Dow’s first close above 19,000 marks the second-shortest length of time between such milestones.

The most rapid rise was between 10,000 and 11,000 from March 29 to May 3, 1999, which took 24 days. The rise from 18,000 to 19,000 took the Dow 483 trading sessions.

The surge since November 22, when the index closed above 19,000 for the first time, has been spearheaded by financial stocks, with Goldman Sachs and JPMorgan accounting for roughly 20 per cent of the gain.

On Wednesday, Boeing hit a record high of $168.65 on strong earnings, giving the Dow its biggest boost before closing up 4.2 per cent at $167.36.

Investors are betting that Trump will usher in a pro-growth agenda that includes tax cuts, and avoid pitfalls, such as starting a trade war.

“I think, in general the market is saying maybe he will get something done in particular as it relates to tax reductions and possibly even economic stimulus,” said Sam Stovall, chief investment strategist at research firm CFRA.“

“I think people are feeling encouraged by his actions to date.”