The Dow, which first nearly topped 20,000 on 13 December and again on 6 January, when it came within 0.37 points of the landmark, finally broke through after the opening bell was rung on Wall Street by Ashton Poole, CEO of lender Triangle Capital. When the closing bell was rung by executives from InBev, brewers of Stella Artois, traders whooped and cheered a new milestone in the index, which closed at a record high of 20,068.
The market had rallied sharply in the wake of Donald Trump’s presidential victory but seemed to lose steam ahead of his first day in office. It broke the barrier on Wednesday morning after infrastructure stocks rose sharply ahead of the market’s opening, boosted by Trump’s renewed pledge to build a wall along the Mexican border and talks of massive infrastructure investment. A rise in Boeing’s shares, which reported better than expected results on Wednesday, and the continued rally in the financial sector that has accompanied Trump’s win also helped push the Dow over the line.
The Dow record comes as the S&P 500 index, tech-heavy Nasdaq and London’s FTSE 100 stock market index have all hit record highs in recent weeks.
The Dow, which has risen about 9% since Trump’s victory, is probably the best-known US stock indicator although its limited measure is not the one favoured by most market professionals. It measures the performance of 30 of the largest publicly owned companies based in the United States, including Apple, ExxonMobil and Goldman Sachs. While it has inched over the 20,000 mark, overall its latest rise has been sudden. The Dow surpassed 19,000 for the first time just 42 days ago – two days before the Thanksgiving holiday and has risen 5.6% since then. Similar sharp rises in the index have been followed by sharp falls.
The last time the Dow added 1,000 points so quickly was in May 1999. The index passed 10,000 in that same year, the height of the dotcom bubble, only to lose much of those gains in the coming crash. But market watchers said they believed this rally was on a more solid footing.
The recent rapid rise has been driven in part by expectations that Trump will introduce policies that will boost growth and cut regulatory pressures on US companies. Trump has pledged to roll back the Dodd-Frank regulations brought in to more tightly control financial institutions in the wake of the 2008 financial meltdown. Banks and other financial companies have been among the biggest beneficiaries of the recent share-price rise.
But the rise comes against a strong upward trend in the Dow that stretches back to the end of the recession in 2009 and the decision of the Federal Reserve to slash interest rates, making shares a more attractive investment.
Few on Wall Street seemed overexcited by the news. When the Dow hit 10,000, Richard Grasso, then chairman of the New York stock exchange, closed the day’s trading with Rudy Giuliani, New York’s mayor. They threw “Dow 10,000” caps to a cheering crowd of traders.
The reaction was more muted this time, in part because so much trading has moved online since 1999 and also because the new level comes after an eight-year run of rises.
Scott Wren, senior global equity strategist for Wells Fargo Investment Institute, said given the overall health of the US economy he would have expected a broadly similar rise had Hillary Clinton won the election. Any changes to regulation Trump has planned could take years to pass and implement, he said, and investors were more interested in shorter-term trends. “I would hesitate to call it a Trump rally,” he said. “I’d say 80% of where we are now is down to fundamentals and probably another 20% is post-election enthusiasm.”
Jack Ablin, chief investment officer of BMO Financial Group, called the news “psychologically important” but said it was unlikely to set a new benchmark for the index, and that the Dow would probably dip above and below the 20,000 level for some time.
“The surge in financials is probably one of the biggest fuel sources for this rise,” said Ablin. “It’s hard to know if it’s sustainable; there is a lot of expectation not only that these new policies will be passed but also that they will work.”
Rapid rises in the Dow have been followed by equally rapid falls. The Dow peaked at 11,722.98 in January 2000. After the dotcom bubble burst it took more than seven years for the Dow to hit its next milestone of 12,000, in October 2006.
The Dow topped 14,000 in July 2007 – the height of the housing bubble and less than three months after passing 13,000. After the crash it took the Dow six years to return to that level.
But Wren predicted 2017 would be a relatively stable year for US stock markets. “I don’t think 20,000 is a sign of overenthusiasm or froth,” said Wren.
The Dow hit its record high after a new poll showed consumer confidence surged in December. The Conference Board’s consumer confidence index rose to 113.7, up from 109.4 in November. Its “expectations index”, which measures consumers’ confidence about the future, increased sharply from 94.4 to 105.5, a 13-year high. Older consumers, however, were markedly more optimistic than younger ones.
“The post-election surge in optimism for the economy, jobs and income prospects, as well as for stock prices, which reached a 13-year high, was most pronounced among older consumers,” said Lynn Franco, director of economic indicators at the Conference Board. “Looking ahead to 2017, consumers’ continued optimism will depend on whether or not their expectations are realized.”
|A stock trader looks at information on a screen as the Dow Jones industrial average closes in on the 20,000 mark. Photograph: Mark Lennihan/AP|
Dow Jones industrial average reaches new high, tops 20,000 level for first time
NEW YORK — The closely watched Dow Jones industrial average reached historic levels Wednesday, landing above 20,000 points for the first time in a week when President Trump began to put his agenda in place.
Shortly after the election, investors dubbed a surge in stock prices the “Trump rally,” pushing U.S. stocks to new heights in anticipation that the new president would work with the Republican-led Congress to lower taxes and pass more business-friendly policies. But time and again as the Dow appeared ready to breach the 20,000 threshold, there was a retreat.
This week, as Trump vowed to rewrite trade agreements and revive pipelines, the markets began to rev again. It closed on Wednesday at 20,068, up 0.8 percent.
For the Dow, encompassing 30 large publicly traded companies, topping the 20,000 level holds more symbolic than practical value. But Wall Street has been anticipating the rise could give investors the psychological boost to keep stock prices climbing even further.
The broader Standard & Poor’s 500-stock index and the tech-heavy Nasdaq composite index have also been trading at record levels. The recent run-up in stock prices has added about $2 trillion in market value since the election to companies that make up another broad index, the Wilshire 5000.
Among the biggest contributors to the rise in the Dow has been Goldman Sachs. The bank has seen its stock price rise 30 percent since the election, accounting for more than 20 percent of the Dow’s rise. “Goldman Sachs went from persona-non-grata the day of the election to back in the White House” after the election, Howard Silverblatt, a senior index analyst at S&P Dow Jones Indices, said in a research note.
The Wall Street giant’s stock has soared amid expectations that the Trump administration will roll back regulations put in place to rein in the banking sector after the 2008 financial crisis. It hasn’t hurt that Trump picked Goldman veterans to lead the Treasury Department and chair his team of economic advisers.
The Dow has surged nearly 10 percent since the election. The Standard & Poor’s 500-stock index, a broader take on the market, and the tech-heavy Nasdaq hit record levels earlier this week and rose nearly 1 percent in trading Wednesday as well.
Stocks staged a remarkable rebound in 2016, starting the year with massive sell-offs as investors worried about China’s rocky economy and falling oil prices and then panicked when Britain voted to leave the European Union.
Each sell-off was followed by a recovery that pushed stock prices back into positive territory. After sagging as much as 10 percent in 2016, the Dow jumped 13 percent for the year, more than half of the rise coming since the election. The S&P was up about 10 percent last year, while the Nasdaq grew about 9 percent.
The markets’ rise “becomes self-fulfilling momentum,” said Art Hogan, chief market strategist for the investment firm Wunderlich. “Whether you’re an individual or an institution you start chasing momentum.”
But, some market analysts say, stock prices may have already risen too far too fast. Investors are ignoring potential stumbling blocks that lie ahead for the U.S. economy, including that the Federal Reserve is beginning to raise interest rates — it bumped up a key lending rate last week, a move that traditionally has added costs for businesses. And it is unclear whether Trump will be able to implement all of his campaign promises, including lowering corporate taxes.
The rise in stock prices has also coincided with a sell-off in the bond market, a traditional safe haven during economic turbulence. The interest rate on a 10-year government note has risen from about 1.7 percent before the election to about 2.4 percent recently as investors demand a bigger return in exchange for locking up their money for a long period. When the interest rate rises, the price of the bond falls.
Dow Jones breaks 20,000 for first time ever and global stocks hit 19-month high as markets reignite 'Trump rally'
The Dow Jones smashed the landmark 20,000 barrier for the first time ever this afternoon as optimism about Trump’s pro-growth policies boosted financial markets.
Resuming a rally that began in the wake of Donald Trump’s shock US presidential election win, the index rose by as much as 0.73pc to 20,057.89.
The rally was reignited by Trump’s signing of numerous executive orders since his inauguration on Friday. Last night, he also tweeted about his intention to build a wall on the Mexican border.
The Dow Jones has surged by more than 10pc since November and it came within a whisker of touching the historic 20,000 mark on January 6. It fell in the run up to Trump’s inauguration as traders grew cautious of his protectionist policies and sought clarity on the administration’s new policies.
It has taken the index just two short months, or 42 sessions, to climb from the first close above 19,000 to 20,000. It’s worth noting the rise between 18,000 and 19,000 took some 483 trading sessions.
The biggest winners of the Trump rally include investment banks Goldman Sachs and JP Morgan, rising by 34pc and 26pc, respectively, amid hopes Trump’s fiscal stimulus package will trigger inflation and stoke a rise in interest rates.
Neil Wilson, of ETX Capital, said: "It’s psychologically huge and, after a bit of pullback ahead of the inauguration, really confirms that the ‘great rotation' from bonds to stocks is definitely upon us. Fears about protectionism are running second to optimism about inflation and growth – for now at least."
Highlights from today's trading session include:
- Global stocks hit 19-month high as markets reignite Trump-infrastructure rally
- Pound breaks $1.26 as traders cite broad dollar selling
- Dollar drifts lower as rebound stalls
- Baltic Dry Index falls 30pc since November high
- Shares in CRH rally on Trump's infrastructure plans
- S&P 500 and Nasdaq set record highs on Tuesday
- Dow Jones breaks 20,000 level for first time ever
- Why has the Dow Jones hit the 20,000 mark and does it really matter?
The Dow Jones Industrial Average broke through 20,000 for the first time in its 131-year history after a series of executive orders from US President Donald Trump reignited a post-election rally.
After flirting and demurring for the last month, the index finally crossed the psychological barrier as the opening bell sounded on Wall Street. It jumped by as much as 0.85pc to an all-time high of 20,082.
The post-election rally roared back to life across financial markets worldwide as traders bet the US President will now press ahead with a large fiscal spending package after signing executive orders to reduce regulatory burden on domestic manufacturers and clearing the way for the construction of two oil pipelines.
Since Trump’s shock election win in November, bullish sentiment has propelled the index 12pc higher. On January 6, the Dow came within a whisker of the landmark level, falling 0.37 points short of 20,000, as investors banked on tax cuts and pro-growth policies from the new administration.
Despite a slight pullback ahead of Trump’s inauguration as investors grew cautious of his protectionist policies and sought clarity on his policies, the Dow soon regained momentum.
The milestone comes almost 18 years after it reached the 10,000 level on March 16, 1999. However, its latest breakthrough comes just two months, or 42 trading sessions, after it touched 19,000. The rise between 18,000 and 19,000 took 483 trading sessions.
Chris Beauchamp, of IG, said the rally in the Dow is a sign that the long-term bull market “remains intact”.
US investment banks emerged the biggest winners from the Trump rally, with Goldman Sachs and JP Morgan racking up gains of 34pc and 26pc, respectively amid hopes the President’s spending plans will trigger inflation and stoke a rise in interest rates.
The S&P 500 and the Nasdaq Composite indexes also hit record intraday highs, rising by as much as 0.95pc and 0.79pc, respectively.
Touching 2,298 in intraday trade, the S&P 500 is just two points shy from touching Goldman Sachs’ 2017 year-end target.
Global stocks also enjoyed a renewed 'Trump-bump’, with the MSCI’s global share index rising by as much as 0.3pc to a 19-month high of 434 points.
In Europe, Germany’s DAX stormed to its highest level since May 2015, up 1.8pc on the day, while the CAC in Paris rose 0.99pc and the FTSE 100 made modest gains of 0.2pc.
On currency markets, a weak dollar and US trade hopes lifted the pound to a six-week high. Broad selling across the dollar in afternoon trading took the pound up by as much as 0.8pc across $1.26 against the dollar for its first time since December 14.
Traders also suggested Trump’s meeting with Prime Minister Theresa May was also supporting the local currency.
Meanwhile, the dollar index, which measures the greenback against a basket of major currencies, languished at its lowest level since December 8, down 0.3pc at 100.06.
Gold prices tumbled 1.6pc to a one-week low of $1,193.32 an ounce as hopes Trump will unleash business-friendly spending policies eroded the precious metal’s attraction.
However, the rekindled post-election euphoria may prove short lived as analysts pointed to the Baltic Dry Index, seen by many as a leading indicator of the state of the world. The index, which measures shipping costs for commodities including iron ore, copper and steel, has plunged 30pc since Trump’s election win. Neil Wilson, of ETX Capital, said the slump of late in the Baltic Dry index is “a signal that fears of protectionist policies are very high”.