New milestone for Dow Jones
THE Dow Jones Industrial Average surpassed the psychological 20,000 barrier last Wednesday as investors hope that US President Donald Trump’s pro-growth initiatives and large fiscal spending plans will boost the economy and “make America great” again.
Dow Jones got incredibly close and struggled to break the key level on January 6 as investors remained cautious on the new US administration’s policies. To note, the Dow Jones has surged more than 1,700 points since Trump’s victory in November. In fact, majority feared a market crash if Trump upset Hillary Clinton.
Robust earnings and optimistic on Trump’s pro-business policies rekindled a rally in three major benchmark US stock indexes, pushing them to record highs. Investors were confident of the prospects for the US economy.
The bullish sentiment also lifted by better- than- expected fourth- quarter earnings. More than a quarter S& P 500 companies have reported results, which nearly 70 per cent have beaten expectations, according to Thomson Reuters. Earnings are expected to show growth of 6.8 per cent for the quarter, the strongest in two years.
Trump signed a series of executive orders after inauguration ceremonies on January 20, which include clearing the way for the construction of two oil pipelines, Keystone XL and Dakota Access. The orders immediate lifted the materials sector.
Meanwhile, Trump ordered to build a wall along the US southern border and also planned to clamp down on legal immigration.
The dollar index, which measures the greenback against a basket of six other major currencies, recovered from seven-week on the new US administration’s plans to spur growth. As a result, gold prices fell below US$ 2,000, erasing earlier gains.
Crude prices have been vacillating in consolidation phase, driven in large part by the Organisation of Petroleum Exporting Countries (Opec) and its recent decision with its allies to cut a collective 2 per cent of global crude supply. Such move aimed at balancing the market following more than two years of low prices and excess inventories.
The US added jobs for a record 75 straight months and the unemployment rate is sitting near a 10-year low. In latest economic news, the US economy slowed down with the gross domestic product ( GDP) grew at an annual rate of just 1.9 per cent in the fourth quarter. In weeks ahead, investors will continue to monitor Trump’s first 100 days in office and focus on corporate earnings. Unexpectedly robust corporate earnings are likely to drive stock indexes higher. Any political instability within European countries will create a barrier for the Dow Jones.