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Saturday, December 3, 2016

Dow closes over 19,000 as Trump rally continues

(November 22) The US stock rally evident on Monday continued on Tuesday with the Dow Jones briefly breaking through the 19,000 level for the first time in history.

On Monday all four major US stock indices closed at record highs. The prices of energy stocks rose as investors see OPEC countries finalizing a deal to cut oil production a move that will help support oil prices. The Standard & Poor 500 closed at a record high of 2198.18 rising 16.28 points. The Nasdaq rose 0.9 percent or 47.35 points to close at the all-time high of 5368.86. The Russell 2000 rose half a percentage point or 6.59 points to 1322.23. The Dow Jones Industrial average also gained a half percentage point or 88.76 percent to a record close of 18,956. This is the first time that all four indices set a record in one day since way back on December 31st 1999 according to Ryan Derrick who is the senior market strategist for LPL Financial.
While media coverage of the Trump victory often stresses negative features of his campaign and choices for his government, the establishment as represented in stock market investors, sees his election in positive terms. His promises of pro-growth fiscal policies and tax cuts has resulted in many investors turning bullish about the US economy. The surge is also being bolstered by an anticipated hike in interest rates by the Fed next month.
The possible cut in oil production by OPEC members sent the price of US crude to $47.49 a barrel up almost 4 percent and Brent crude, the international standard, was up over 4 percent to $48.90. However, Quincy Krosby of Prudential Financial claimed that even if a deal does happen it will not have much impact on oil prices: “There’s nothing to suggest the agreement’s going to hold. When all is said and done, supply and demand will ultimately dictate the price.” The US dollar has been rising against many world currencies as investors foresee a Fed interest rate hike in December. The US dollar has risen almost 7 percent against the Japanese yen in the last week, which will help Japanese exporters.
The stock market rally continued into Tuesday morning with the Dow Jones Industrial index hitting an all-time high of 19,013.12 before falling back. As I write this about 11 AM Central Time, the index has fallen back below 19,000 at 18,973.71 but is still up on the day. Added to the tax cuts and infrastructure spending Trump is promising, he is also claiming to introduce simpler regulations in both the banking and the healthcare sectors. Robert Pavlik, chief market strategist at Boston Private Wealth located in New York said: "Optimism is returning because of the potential that exists in the form of fiscal stimulus, infrastructure spending and tax cuts and is renewing confidence on the part of investors and consumers." He noted the rally was broad-based, a positive sign for markets. The Toronto Stock Exchange S&P/TSX rose this morning to 15,085.12 shortly after the opening. Since Trump defeated Hillary Clinton to become president-elect, the Dow Jones has risen almost 4 percent. Shortly after Obama took office the Dow Jones hit a low of about 6,400 and so has almost tripled since then.
Trump's win plus the Republican control of both the Senate and the House appears to be taken as a plus by the market. Trump's policies together with those of the Republicans are considered overall to be business-friendly in spite of the fact that Trump has promised to dump the Trans-Pacific Partnership (TTP) deal as well as renegotiate the North American Free Trade Agreement (NAFTA).

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