Dow Hits New Record, Tech Sells Off a Day After Trump Victory

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day after voters chose to send Donald Trump to the White House, the expectation of less austerity and more pro-business policies propelled the Dow Jones Industrial Average to a new high at the opening bell.

The Dow easily sailed above its previous intraday record high of 18668 points at the start of trade, though it pared those gains early in the session. In recent action, it rose 140 points, or 0.75% to 18728. In order to close at a fresh high, the index needs to finish above its previous record close of 18636.05, which it set back in August.

day after voters chose to send Donald Trump to the White House, the expectation of less austerity and more pro-business policies propelled the Dow Jones Industrial Average to a new high at the opening bell.

The Dow easily sailed above its previous intraday record high of 18668 points at the start of trade, though it pared those gains early in the session. In recent action, it rose 140 points, or 0.75% to 18728. In order to close at a fresh high, the index needs to finish above its previous record close of 18636.05, which it set back in August.

The three major averages roared back to life during the prior session, as the Dow made up for steep pre-market losses of 867 points during heightened uncertainty about the outcome of the presidential election, to finish the trading session up 256 points, or 1.4%. The S&P 500 and Nasdaq Composite indexes also ended solidly in the green after notching losses of 5% during the overnight hours.

“The source of this bounce seems to be grounded in the differential between Trump’s economic and social policies,” said Joshua Mahony, IG market analyst. “With the promise of a tax repatriation scheme for multinationals, lower tax rates, and higher government spending, it seems the markets are waking up to the chance of a growth-driven economic period for the U.S.”

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Although tech shares sold off, the financials, industrials, and health care sectors led the way higher. Gains were propelled by JPMorgan Chase(JPM) and Visa (V), both of which jumped to new lifetime highs. It was the second-straight day of records for the biggest U.S. bank by assets.

The rally in infrastructure-related investments has shown the market will react to whatever it hears from the soon-to-be President Trump, which means he will soon learn the power of his new pulpit, economists at Credit Suisse said.

“An increased likelihood of a boost to infrastructure-targeted government spending is positive for the growth outlook. However, infrastructure projects take considerable time to plan and initiate, and three-quarters of U.S. infrastructure spending is done at the state and local level, not the federal level,” they explained.

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But  economists at Goldman Sachs (GS) are sticking with their forecast for an annualized growth rate of 2% in 2017, though they note much of that will hinge on how businesses and financial conditions react to Trump’s forthcoming policy proposals.

“Investors may take a dimmer view on proposals to raise tariffs or otherwise restrict international trade,” they said. “Beyond the next couple of quarters, increased potential for fiscal stimulus may be the source of upside risk. Given that the U.S. economy is already close to full employment, aggressive fiscal stimulus would also point to upside inflation risks.”

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The potential for upside inflation would allow the Federal Reserve to continue on its rate-hike path. Investors are expecting a 0.25% increase in short-term interest rates at the conclusion of the central bank’s meeting next month.

With economic prospects looking more promising than initially thought under a Trump administration, on Thursday traders continued to move away from safe-haven plays. Gold prices, which had gained as much as 5% before Trump was declared president-elect, on Thursday fell 0.51% to $1,267 a troy ounce.

Prices for U.S. Treasury bonds fell thanks to the risk-on sentiment on Wall Street. The yield on the benchmark 10-year T-bond rose 0.023 percentage point to 2.087% after hitting its highest since January in the prior session.

Elsewhere, the Mexican peso, which has been Wall Street’s favorite proxy for betting on Trump’s odds of success in the presidential race, found much calmer trading waters on Thursday. The currency saw losses of more than 12% against the U.S. dollar in Tuesday’s overnight hours, but had recovered to trade lower by 3.17% Thursday. Meanwhile, traders continued to bid up the greenback, which rose 0.37% against a basket of developed-market currencies, rising for the fourth-straight day.

Meanwhile, the VIX – commonly referred to as Wall Street’s fear gauge – which measures investor expectation for volatility over the next 30 days, declined to 13. It had risen as high as 22 days before the election.

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1 Comment

  1. janice

    Maybe Just Maybe America Will Rebound As A More Prosperous Country!

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