Yesterday investors jumped on stocks that could benefit from the election of Donald Trump and selling assets that might not participate in an aggressive Republican stimulus plan.
But during Tuesday evening, as returns favored a new, uncharted direction, Dow Jones stock futures fell over 600 points. Thus investors were relieved when bargain hunters jumped on the opening with the expectation that a Trump presidency could result in a stream of fiscal stimulus that would break the tepid growth of the last eight years, increase inflation, and result in higher bond yields.
The S&P 500 rose 1.1%, as did the Nasdaq, and the Dow industrials gained almost 1%. And the ten-year Treasury note’s yield jumped to over 2%, as bonds were sold to purchase stocks more attuned to a Trump economic recovery. Seven of the S&P 500’s sectors scored gains with financials leading (+4.1%), and the beaten-down healthcare sector second (+3.4%). The iShares Nasdaq Biotechnology Index (ETF) (NASDAQ:IBB) ended the day with a gain of 8.9%.
At the close, the Dow Jones Industrial Average gained 257 points, closing at 18,590, the S&P 500 rose 24 to 2,163, the Nasdaq jumped 58 points to 5,251, and the Russell 2000 closed at 1,232, up 37. The NYSE’s primary exchange traded over 1.4 billion shares with total volume of 6.2 billion shares. Nasdaq crossed 2.8 billion shares. On the Big Board, advancers led decliners by 1.3-to-1, and on the Nasdaq, advancers led by 2.6-to-1. Block trades on the NYSE increased to 7,339 from 5,339 on Tuesday.
Although not yet a true “breakout,” yesterday’s high-volume advance by the “benchmark index,” the S&P 500, was impressive. The advance started with a “V” bottom last week that successfully tested the 200-day moving average at approximately 2,085. In three straight sessions, it climbed on average volume and yesterday blasted through the 50-day moving average at 2,146. The next resistance is at the August closing high at 2,190 and a concentration of high-volume days from the high to 2,145.
Conclusion: Although the picture looks like an almost perfect prelude to a blast-off to another new high, it could also be a high-volume buying climax. The key to the near-term success of this rally is its ability to either advance through 2,200 or stabilize at the 50-day m.a. as a base, until enough buyers accumulate to push on to a new high.
The following sectors and sub-sectors gained from Trump’s victory:
Drug Companies, Health Insurers, Autos, Energy, Defense (see Trade Of The Day), Retailers, Coal, Construction, Mining, Food & Restaurants and Trucking.
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.