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Dow Jones sets record high in otherwise mixed trading day on Wall Street

Published 10/11/2016

It was a record day for the Dow Jones Index
It was a record day for the Dow Jones Index

Banks and other financial companies led US stocks mostly higher on Thursday, propelling the Dow Jones industrial average to a record high.

The Standard & Poor's 500 index, a broader measure of the stock market, also eked out a gain, adding to a big rally the day before following Donald Trump's presidential election victory.

The Nasdaq composite closed lower, weighed down by a slide in technology companies. Bond prices slumped again, sending yields higher.

"You are seeing a massive swing out of cash and fixed-income and into equities to take advantage of this pro-growth cycle that the market believes we're beginning," said David Lyon, global investment specialist at JP Morgan Private Bank.

The Dow climbed 218.19 points, or 1.2%, to 18,807.88. That is a gain of about 1% from the average's previous record high set on August 15. The S&P 500 index added 4.22 points, or 0.2%, to 2,167.48.

The Dow and S&P 500 index are on a four-day winning streak. The tech-heavy Nasdaq lost 42.28 points, or 0.8%, to 5,208.80.

Investors continued to make moves based on the bevy of possible policy changes that the Trump administration could implement once it takes over in January. Those include cutting taxes, increasing infrastructure spending and slashing government regulation of businesses.

That has particularly given a boost to financial, industrial and health care stocks, while prompting traders to sell consumer goods companies, utilities and phone companies. Investors have also continued to pull out of bonds in anticipation that Mr Trump's policies could usher in stronger economy and, possibly, higher inflation, both of which are bad for bonds.

The sell-off in bonds continued on Thursday, sending bond prices lower and kicking the yield on the 10-year Treasury note up to 2.15%, the highest it has been since January, from 2.06% late Wednesday. That yield is a benchmark used to set interest rates on many kinds of loans including home mortgages.

Traders have been selling bonds more aggressively to hedge against the possibility that interest rates, which have been ultra-low for years, could rise steadily again under Mr Trump's administration.

That scenario would favour banks and other financial companies, one reason why the sector continued to rally on Thursday. Higher interest rates help banks earn more money from lending, and years of ultra-low rates have crimped profits at big banks.

JPMorgan Chase led the 30 companies in the Dow, climbing 3.40 dollars, or 4.6%, to 76.65 dollars. It was followed by Goldman Sachs, which rose 8.24 dollars, or 4.3%, to 200.87 dollars.

Wells Fargo gained 3.64 dollars, or 7.6%, to 51.63 dollars, while Discover Financial Services added 3.31 dollars, or 5.5%, to 63.60 dollars.

Traders also bid up shares in Macy's and Kohl's after the companies reported their latest quarterly results.

Macy's rose 2.1 dollars, or 5.6%, to 40.53 dollars. Kohl's was the biggest gainer in the S&P 500, adding 5.27 dollars, or 11.5%, to 50.97 dollars.

Some big names in the technology sector closed lower.

Netflix slumped 6.77 dollars, or 5.5%, to 115.42 dollars, while Amazon.com slid 29.50 dollars, or 3.8%, to 742.38 dollars. Microsoft fell 1.47 dollars, or 2.4%, to 58.70 dollars.

Shares in several phone companies also slumped. AT&T lost 87 cents, or 2.3%, to 36.57 dollars, while Verizon slid 1.17, or 2.4%, to 46.69 dollars.

The major stock indexes in Europe turned lower after an early rally. Germany's Dax slid 0.1%, while the CAC-40 in France fell 0.3%. Britain's FTSE 100 lost 1.2%. Optimism that Mr Trump's election will improve U.S.-Russia relations helped lift the Micex index in Moscow 0.9%.

Markets in Asia fared better. Japan's benchmark Nikkei 225 index rocketed 6.7% after sliding more than 5% the day before. South Korea's Kospi advanced 2.3% and Hong Kong's Hang Seng added 1.9%. Australia's S&P/ASX 200 surged 3.3%.

Crude oil prices declined. Benchmark U.S. crude fell 61 cents, or 1.3%, to close at 44.66 dollars a barrel in New York. Brent crude, used to price international oils, lost 52 cents, or 1.1%, to close at 45.84 dollars a barrel in London.

Other energy futures also closed lower. Wholesale petrol slid two cents to 1.34 dollars a gallon. Heating oil fell a penny to 1.44 dollars a gallon. Natural gas lost six cents, or 2.2%, to 2.63 dollars per 1,000 cubic feet.

In metals trading, the price of gold fell 7.10 dollars to 1,266.40 dollars an ounce, while silver added 36 cents, or 2%, to 18.74 dollars an ounce. Copper rose nine cents, or 3.7%, to 2.55 dollars a pound.

In currency trading, the dollar continued to strengthen on Thursday.

The US currency rose to 106.83 yen from 105.84 yen on Wednesday, while the euro slid to 1.0890 from 1.0930 dollars. The Mexican peso continued to weaken against the dollar.

One dollar bought 20.61 pesos on Thursday, more than the 19.87 pesos it bought late Wednesday. Investors worry that Mr Trump's anti-immigration stance and intention to repeal a trade pact with Mexico could hurt that country's economy.

AP

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