Dow climbs again as Trump effect continues

Banks and drugmakers rally on optimism US Congress will ease regulatory oversight

Traders work on the floor of the New York Stock Exchange. Stocks have outperformed bonds since Trumps victory. Photograph: Michael Nagle/Bloomberg

Traders work on the floor of the New York Stock Exchange. Stocks have outperformed bonds since Trumps victory. Photograph: Michael Nagle/Bloomberg

 

US stocks fluctuated, after the SandP 500 Index posted its best week since 2014, as investors assessed equity valuations amid a fixed-income rout that has sent Treasury yields surging to the highest since January.

The benchmark gauge added 0.2 per cent to 2,167.78 in New York after opening, after rising 3.8 per cent last week in the wake of Donald Trump’s presidential election win.

The Dow Jones climbed 54.79 points, or 0.3 per cent, to 18,902.45 after closing at a record for a second session. The Russell 2000 Index jumped 1.4 per cent, rising above its all-time closing high, while the Nasdaq Composite Index was little changed.

“There’s a lot of repositioning going on in the market rather than the whole market rolling over, with the sectors expected to do well under Trump outshining those which should fare worse,” said Jasper Lawler, a London-based analyst at CMC Markets.

“We are starting to see a reallocation according to the fiscal policy.”

Debt

Investors on Monday weighed the implications of an intensifying global debt selloff, a strengthening dollar and sliding crude prices.

Stocks have outperformed bonds since Mr Trump’s win, on speculation his pledge to spend more on infrastructure will trigger interest-rate hikes amid a pickup in growth and inflation.

Equities had their biggest inflows in 17 weeks as bonds saw redemptions, for their largest gap in 12 months, a Bank of America report on Thursday showed.

Trump’s victory has divided the stock market into winners and losers amid speculation on how policies under the new government will impact on those industries.

Banks and drugmakers have rallied on optimism a Republican-controlled Congress will ease regulatory oversight, while so-called bond proxy groups such as utilities and real-estate shares declined.

Borrowing

Traders are pricing in an 92 per cent chance the Federal Reserve will increase borrowing costs next month. A bevy of Fed officials are scheduled to speak this week, including chairwoman Janet Yellen who is scheduled to testify on the economic outlook before congress on Thursday.

Reports on retail sales and industrial production later this week will also offer investors more clues on the pace of growth.

The SandP 500 closed Friday within 1.2 per cent of a record last reached in August, and on track for its best annual advance since 2014. Small caps have also climbed since the election, with the Russell 2000 surging 10 per cent last week, its strongest in almost five years.

As the earnings season winds down, Home Depot, Cisco Systems, Gap and Wal-Mart are among those reporting this week.

– (Bloomberg)