Dow surges above 25,000
Broader indexes also soar; energy shares boom as streak continues
The Dow Jones industrial average vaulted above 25,000 points for the first time as Wall Street eyed a strengthening U.S. economy, healthy corporate profits and growing confidence among businesses and investors.
The rally extended a record-breaking streak that began last January when the Dow broke through the 20,000 mark and continued as it climbed about 25 percent over the rest of the year. The blue-chip index crossed the milestone just 23 trading days after it broke above 24,000 — the fastest 1,000-point gain in the Dow’s 122-year history.
The catalyst for the surge was a report by the ADP Research Institute estimating that U.S. private-sector employers added over 250,000 jobs in December, about one-third higher than Wall Street expects the Labor Department to report Friday. The Dow climbed 152 points to close at 25,075, up 0.6 percent.
Broader stock indexes also are soaring. The S&P 500, which rose 0.4 percent to 2,723 Thursday, is up 20 percent over this time last year. The technology-heavy NASDAQ Composite is up 29 percent over the year after adding 0.2 percent to 7,077 points Thursday.
Analysts said the recently enacted tax overhaul, which lowers the corporate tax rate from 35 percent to 21 percent, has contributed to the Wall Street fervor in recent days, but most of the momentum has come from improving fundamentals: strong corporate earnings and economic growth.
The nation’s economy grew at 3.2 percent annual rate in the third quarter, the fastest pace in nearly two years, according to the Commerce Department. The U.S. jobless rate, meanwhile, fell to 4.1 percent in November, the lowest since 2000, according to the Labor Department.
The rebound in the energy sector has also helped buoy stock indexes. The financial research firm FactSet estimates that fourthquarter earnings for companies within the S&P 500 Index will grow nearly 11 percent from a year earlier, with the U.S. energy industry expanding the fastest.
Oil and gas companies, many of which are headquartered in Houston, are expected to report an almost fourfold increase in profits the last three months of 2017, compared to the same period in 2016.
FactSet expects the sector, which includes major oil companies, independent producers, rig contractors, service companies, refiners and pipeline operators, to report earnings of almost $40 billion in 2017, compared with $10.6 billion in the year before.
U.S. oil prices rose 38 cents to settle at $62.01 a barrel on Thursday, the highest settlement since December 2014, after the Energy Department reported that U.S. oil inventories fell by 7.4 million barrels — the seventh consecutive weekly decline. After some three years of a stubborn supply glut, the nation’s commercial crude stockpile has nearly dropped to historically normal levels for this time of year.
If oil prices stay above $60 a barrel, economists project that Houston, the heart of the U.S. oil industry, could add some 75,000 jobs this year.
The S&P 500 index for oil and gas producers has climbed 13 percent since mid-December as oil prices surged on strong global demand and geopolitical conflicts in the Middle East, including a popular uprising in Iran, one of the world’s largest oil-producing countries.
That stock index includes the share prices of Houston-area oil producers Anadarko Petroleum Corp. and Marathon Oil Corp., which have risen 16 percent and 20 percent, respectively, since mid-December.
Investors also have raised the stock-market value of Houston oil producers ConocoPhillips, EOG Resources, Apache Corp. and Noble Energy by a combined $19 billion.
“You’ve finally had all the energy stocks wake up,” said Drew Kanaly, a financial adviser in Houston. “There’s something robust going on here.”
Last year, at the start of the rally, investors banked on the Trump administration’s promises it would cut regulations and lower taxes, analysts said. Wall Street’s enthusiasm for Trump administration policies may fade somewhat this year, but indications of strong U.S. economic growth and healthy corporate earnings are expected to keep the rally going.
Fourth-quarter earnings for technology companies are forecast to grow 14.5 percent; financial services, 6.8 percent; health care, 5.9 percent, according to FactSet.
Gil Baumgarten, president of Segment Wealth Management in Houston, estimated the Dow could climb another 10 percent this year — a solid gain, but only about half the appreciation in 2017.
“The honeymoon will be a little bit over in 2018 but the economic benefits of tax reform will start to show up,” Baumgarten said. “I don’t think there’s a replay of 2017 in the cards.”
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“You’ve finally had all the energ y stocks wake up. There’s something robust going on here.” Drew Kanaly, financial adviser