On Thursday, stocks rose modestly following comments by Federal Reserve Chair Janet Yellen that the economy is strong enough to sustain a rise in short-term interest rates “relatively soon.” As a result, the 10-year Treasury jumped to its highest yield of the year.
Bank shares and U.S. government yields rose following her statement and after data on housing, employment and inflation were close to meeting the Fed’s standard for a rate hike. President-elect Donald Trump’s policies to ease restrictions on banks and other financial institutions provide a more expansive fiscal policy with higher inflation and interest rates.
The SPDR KBW Bank (ETF) (NYSEARCA:KBE) gained 1.3% after Yellen’s comments. And homebuilders did well, too, with the iShares Dow Jones US Home Const. (ETF) (NYSEARCA:ITB) rising 2.1%. Another gainer, Best Buy Co Inc (NYSE:BBY), jumped 13.7% after beating the consensus estimate for the quarter and issuing higher-than-expected guidance for Q4.
At the close the Dow Jones Industrial Average gained 36 points at 18,904, the S&P 500 rose 10 to close at 2,187, the Nasdaq gained 39 points at 5,334 and the Russell 2000 closed at 1,309, up 7. The NYSE’s primary exchange traded 856 million shares with total volume of 3.8 billion shares, and the Nasdaq crossed 2.1 billion shares. On the Big Board, advancers slightly outpaced decliners, and on the Nasdaq, advancers led by 1.6-to-1. Blocks on the NYSE fell slightly from Wednesday’s total of 5,293.
Much attention has been focused on the small– and mid-caps as they jumped to new highs. However, the Dow Jones Transportation Average at Tuesday’s close of 8,815 is within reach of a new closing high, the old high being made on Dec. 26, 2014 at 9,200. The breakout from a Cup-&-Handle formation on the weekly chart computes to a minimum target of 9,311 (close).
Conclusion: With a new closing high for the DJIA on Tuesday at 18,924 and a genuine threat to a new closing high in sight for the DJTA, there is little doubt that the bull market is confirmed. Very high volume, unusual for the Dow transports, also confirms the advance while the small- and mid-caps have provided the big short-term trades that speculators like.
However, for the investor, there is nothing more supportive of a continuation of the bull market than a breakout by both the Dow Jones Industrial Average and its companion index, the Dow Jones Transportation Average. The Trump rally, it seems, has just begun.
Today’s Trading Landscape
To see a list of the companies reporting earnings today, click here.
For a list of this week’s economic reports due out, click here.
