US stocks finish at record high on Trump rally

PUBLISHED : Tuesday, 14 February, 2017, 6:57am
UPDATED : Tuesday, 14 February, 2017, 7:53am

Wall Street stocks sprinted to another day of fresh records Monday, extending last week’s rally on expectations President Donald Trump will soon present his promised tax cut plan.

The Dow Jones Industrial Average climbed 0.7 per cent to close the day at 20,412.16. The broad-based S&P 500 gained 0.5 per cent to end at 2,328.25, as did the tech-rich Nasdaq Composite Index which went up 0.5 per cent to 5,763.96.

It was the third straight session that all three major indices ended at all-time highs following Trump’s comments Thursday that he plans to release details about a “phenomenal” tax cut plan in the next two to three weeks.

“It’s just a carry over from last week,” said Bill Lynch, director of investment at Hinsdale Associates.

“The market seems to be giving Trump the benefit of the doubt.”

Jack Ablin, chief investment officer at BMO Private Bank, said, “I am getting a sense of a party atmosphere and investors just do not want to be left out.”

Among the winners, several banks climbed on expectations that Trump will ease regulations imposed after the 2008 financial crisis. JPMorgan Chase, Goldman Sachs and Citigroup all rose more than one per cent.

Technology shares with larger gains included Amazon, up 1.1 per cent, and Tesla Motors, up 4.2 per cent. Apple climbed 0.9 per cent to finish at an all-time closing high of US$133.29.

“The market’s got such good momentum now that it’s going to continue until something slows it down,” said Randy Frederick, vice president of trading and derivatives at the Schwab Center for Financial Research. “There’s really not any negative catalyst right now.”

The S&P 500 has climbed five straight days and is up 8.8 per cent since Donald Trump won the White House in November.

Companies whose profits are most dependent on the strength of the economy were some of Monday’s biggest gainers. Financial stocks in the S&P 500 rose 1.1 per cent, the biggest gain among the 11 sectors that make up the index. Industrials rose 1 per cent. Roughly three stocks rose for every two that fell on the New York Stock Exchange.

Apple’s performance carries extra weight for many retirement 401(k) accounts because of its status as the biggest publicly traded company in the world. It alone accounts for about 3.5 per cent of S&P 500 index fund investments.

The only sector in the S&P 500 to fall on Monday was telecoms, which sank on worries that more pricing wars may be on the way.

Verizon unveiled an unlimited-data plan for its customers, and its stock dropped 43 cents, or 0.9 per cent, to US$48.55. Competitors fell more. AT&T lost 73 cents, or 1.8 per cent, to US$40.65, and Sprint fell 12 cents, or 1.3 per cent, to US$8.84.

Several events are on the schedule that could shift the market’s momentum. Federal Reserve Chair Janet Yellen will offer testimony on Capitol Hill Tuesday and Wednesday to update the Senate and House on monetary policy. Most investors expect the central bank to keep raising interest rates in 2017, though at a modest pace.

Hong Kong, Shanghai stocks extend rally led by financials, car makers

The government will also offer updates on the state of inflation, on both the consumer and the wholesale levels. Many investors expect inflation to rise due to policies proposed by President Trump and Congressional Republicans, though the bond market doesn’t seem to be forecasting a runaway spike.

Treasury yields have been on an upward trend since Election Day, in part because of those expectations for higher inflation. The yield on the 10-year Treasury note rose to 2.43 per cent Monday from 2.41 per cent late Friday. Two-year and 30-year Treasury yields also notched higher.

Stocks climbed in other markets around the world. In Asia, Japan’s Nikkei 225 index rose 0.4 per cent, the Hang Seng in Hong Kong gained 0.6 per cent and South Korea’s Kospi index added 0.2 per cent. In Europe, the French CAC 40 index jumped 1.2 per cent, Germany’s DAX climbed 0.9 per cent and the UK FTSE 100 added 0.3 per cent.