On Wednesday, the Dow Jones Industrial Average sprang over 300 points, crossing through 21,000. The massive leap was attributed to President Donald Trump’s optimistic view of future U.S. growth under his administration.
The 300-point gain mirrored another similar gain made the day before Election Day. And the latest drive ties the Dow’s fastest move between thousand-point markers in history, the last in 1999 when the index jumped from 10,000 to 11,000 in 24 sessions (provided by the Wall Street Journal).
Apple Inc. (NASDAQ:AAPL) led the Dow Jones up 1.5% with a gain of 2% to an intraday high of over $140. The S&P 500 rose 1.4%, the Nasdaq gained 1.3% and the Russell 2000 jumped 1.9%.
In addition to the president’s optimistic address, the likelihood that the Federal Reserve will raise interest rates in March is high. Comments from several members, including Federal Reserve Bank of New York President William Dudley, indicated that a quarter-point rise is likely to occur at the next FOMC meeting in March.
With a rate hike appearing probable, bank stocks jumped driving the financial sector up 2.8%. The charge higher was led by Bank of America Corp (NYSE:BAC), up 3.6%, and J.P. Morgan Chase & Co. (NYSE:JPM), up 3.3%.
But the drive higher has also had an impact on the true average price of stocks, their price-to-earnings ratio. That ratio for the S&P 500 now is at about 22 times its member stocks’ last 12 months earnings. The 10-year look-back average is about 16X, according to FactSet.
At the close, the Dow Jones Industrial Average gained 303 points, closing at 21,116, the S&P 500 rose 32 at 2,396, the Nasdaq gained 79 points at 5,904 and the Russell 2000 closed at 1,414 for a gain of 27 points. The NYSE primary exchange traded 799 million shares with total volume of 4.3 billion shares, and the Nasdaq crossed 2.2 billion shares. On the Big Board, advancers led decliners by 2.1-to-1, and on the Nasdaq, advancers led by 3-to-1. Blocks on the NYSE increased to 7,127 from 6,896 on Tuesday.
Even though the Dow failed to achieve a 13-session record rally, it more than made up for it yesterday. A 116-point continuation gap confirmed the feelings of Wall Street about the goals of the new president. The day opened with a 240-point gap, which was later reduced to 116 points, putting the bulls firmly in command.
Conclusion: The stock market will do what it can to confound the most number of investors possible. The 24-session rally from Dow 20,000 to 21,000 followed a long, tedious pounding of the 20,000 mark. But the last 1,000 points mark the second-fastest run to a round number on record. (Figures courtesy of Michael Ashbaugh.) Michael also correctly points out that “Each 1,000-point marker is easier to reach, as it constitutes a smaller percentage of the base.”
However, I’m not convinced that the rally will continue at such a fever pitch in the face of the next major obstacle. In mid-March, the Fed decides whether to raise rates. If stocks continue at this torrid pace, is it possible that a ½% rate rise would be considered? Let’s hope not.
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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