On Wednesday, the Dow Jones Industrial Average finished above 20,000 for the first time. The barrier had been a psychological line of resistance since the post-election rally began. And it took just 42 days to make the climb of 1,000 points. It was the second fastest 1,000 points in history. According to The Wall Street Journal, the climb was second only to the Dow’s 1,000-point 24-day climb in the 1999’s dot-com boom.
Both the Dow industrials and the S&P 500 rose 0.8%, and the Nasdaq gained 1%. All three major indices closed at record highs buoyed by expectations of pro-business policies under President Donald Trump.
Boeing Co (NYSE:BA) led the Dow 30, climbing 4.2% after it beat fourth-quarter earnings expectations. Caterpillar Inc. (NYSE:CAT) rose 2% and JP Morgan Chase & Co (NYSE:JPM) and Goldman Sachs Group Inc (NYSE:GS) gained 1.6% and 1.5% respectively.
“Risk-On” strategies drove bonds lower, sending the 10-year Treasury’s yield to 2.5% from 2.4% on Tuesday. Gold fell 1.2% to $1,195.90 per ounce. Crude Oil (WTI) fell 0.8% to $52.75 per barrel.
At the close, the Dow Jones Industrial Average gained 156 points to a new closing high at 20,069, the S&P 500 gained 18, closing at 2,298, the Nasdaq rose to 5,656 for a gain of 55 points and the Russell 2000 closed at 1,382, gaining 13 points. The NYSE’s primary exchange traded 880 million shares with total volume of 3.8 billion shares. The Nasdaq crossed 1.9 billion shares. On the Big Board, advancers outpaced decliners by 1.8-to-1, and on the Nasdaq, advancers led by 2.4-to-1. On the NYSE Blocks fell to 6,263 from 6,771 on Tuesday.
There are many new projections for the Dow Jones Industrial Average. Most aim at a further advance to the 20,220 area. The S&P 500, however, is not so visible. Assuming that the 500’s recent breakout was pushed by a “continuation gap,” my minimum target for it is 2,322 (close), or 2,370 (intraday).
Conclusion: With a trailing 12-month P/E ratio for the S&P 500 at over 24X and a forward 12-month P/E at over 17X, the consideration of new positions should be closely examined. Only those undervalued stocks, like our Trade of the Day, should be considered for trades. Recent run-ups that collect public attraction should be avoided since whipsaws from current levels could occur at any time.
Another warning: The recent AAII bullish percent has risen to 44.7%, Neutral is at just 23% “the bottom of its typical range.”
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.
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