Stocks close higher, Dow hits new mark
Trump rally still in power as optimism tops uncertainty
NEW YORK — It was perhaps the most surprising trade in a record-setting week on Wall Street: How quickly investors swapped presidential pre- election jitters for enthusiasm at Donald Trump’s victory over Hillary Clinton.
That enthusiasm — call it the Trump rally — ultimately propelled the Dow Jones industrial average to consecutive all-time highs this week and gave the Standard and Poor’s 500 index its biggest weekly gain in two years.
The rally lost some steam Friday, pulling the S&P 500 slightly lower.
The Dow rose 39.78 points, or 0.2 percent, to 18,847.66. The S&P 500 index fell 3.03 points, or 0.1 percent, to 2,164.45. The Nasdaq composite index gained 28.32 points, or 0.5 percent, to 5,237.11.
For months, investors viewed Trump and his proposed agenda as a more risky bet for the economy and the markets than his rival, who had been perceived as the candidate most likely to keep the status quo.
But then the billionaire won. More importantly, Republicans retained majorities in the House and Senate, ensuring that the president-elect’s party will be in control when he takes office on Jan. 20.
“I don’t think people planned on a straight Republican sweep,” said J.J. Kinahan, TD Ameritrade’s chief strategist. “All of a sudden you realize some of the things that the markets have been wishing for have a chance to be done.”
Investors are betting that Trump and a Republicancontrolled Congress will have a clear path to boost infrastructure spending, cut Investors on Wall Street think President-elect Donald Trump and a GOP-controlled Congress will have a clear path to cut taxes and relax regulations that slow business. taxes and relax regulations that affect energy, finance and other businesses.
That agenda flipped investors’ priorities this week away from defensive assets like bonds, utilities and phone companies, which traders had favored for much of this year, to health care, industrial and financial stocks, which notched their best week since 2009.
The trades mark a re- versal from the last couple of years, when investors coped with government gridlock, sluggish economic growth and low interest rates by prizing less-risky assets and stocks like phone companies and utilities with high dividends.
Health care stocks are perhaps the best example of how investors’ mindset has changed in just a few days.
The sector had been one of the worst performers this year in anticipation that Clinton, who had maintained a lead in the polls, would push to expand the government’s role in health care and curb price increases by drugmakers.
That began to turn around this week, as investors bid up shares in pharmaceutical companies.
Banks also were seen to be potentially hurt by a Clinton win.
But this week they went from being a laggard to one of the biggest gainers. The sector is benefiting from the expectation that the Trump administration will remove some of the regulations imposed on banks following the 2008 financial crisis.
“There’s been a massive shift toward a pro-growth bias within portfolios,” David Lyon, global investment specialist at J.P. Morgan Private Bank.
Investors also are betting that Trump’s policies will lead to higher interest rates, which benefits banks by making it more profitable to lend money.
The anticipation of higher interest rates fueled the sell-off in bonds this week that sent bond prices lower and drove up the yield on the 10-year Treasury note to the highest level since January. OnMonday it was 1.83 percent. It hit 2.14 percent as of late Thursday. Bond trading was closed Friday in observance of Veterans’ Day.
That yield is a benchmark used to set interest rates on many kinds of loans including home mortgages.
Despite the market’s enthusiasm this week, there is still an element of uncertainty about the Trump administration.
There’s the question of what steps Trump will take to clamp down on illegal immigration and to renegotiate trade deals.
“What sounded great on the campaign trail may not be actually so great to a lot of businesses, particularly technology,” Kinahan said.