Updated Nov. 21, 2016 4:05 p.m. ET
*DJIA, S&P 500 and Nasdaq Composite All Close at Fresh Records
The S&P 500, Dow Jones Industrial Average and Nasdaq Composite climbed to a trifecta of records Monday as stocks extended their postelection rally.
Stocks have gained since the U.S. presidential election, with major indexes advancing two weeks in a row through Friday. Investors have piled into banks, health-care stocks and industrials on bets that President-elect Donald Trump would loosen regulation and boost infrastructure spending. At the same time, they’ve pulled back from Treasurys and their stock-market proxies, which are less attractive to investors when interest rates rise.
On Monday, stocks rose broadly, led by gains in energy shares as U.S. oil prices hit their highest levels in three weeks.
“The market’s been ripping since the election,” said Bill Costello, portfolio manager atWestwood Holdings Group. Hopes that the Trump administration would usher in a pro-business, pro-growth environment are driving stocks higher yet, Mr. Costello added.
The Dow Industrials rose 88.76 points, or 0.5%, to 18956.69, above its Nov. 15 closing record of 18923.06. The S&P 500 rose 0.75% and closed at 2198.18, above its Aug. 15 record of 2190.15. The Nasdaq Composite added 0.9% to 5368.86, passing its record close of 5339.52 reached on Sept. 22.
The last time the three major indexes closed at records on the same day was Aug. 15.
U.S. crude oil rose 3.9% to $47.49 a barrel, its highest level since Oct. 28 after Iraq’s oil minister said the country would offer new proposals to cut output at next week’s meeting of the Organization of the Petroleum Exporting Countries.
Marathon Petroleum gained 8.9%, Chesapeake Energy rose 7.1% and Range Resources rose 7%.
In currencies, the dollar paused after a 10-day rally, its longest winning streak in over four years. The WSJ Dollar Index, which measures the U.S. currency against 16 others, fell 0.4%.
The currency had tracked the bond market closely since the election, mostly rising alongside a decline in the price of the 10-year Treasury note. Fed funds futures tracked byCME Group point to a 95% chance of a rate increase next month—a move that analysts say will make the dollar more attractive to investors.
Elsewhere, the Stoxx Europe 600 rose 0.2%. The Nikkei Stock Average and the Shanghai Composite each added 0.8% to reach their highest closing levels since January.
Financials led much of the charge that sent major U.S. indexes to fresh records Monday.
Investors have been betting that a Trump presidency would usher in an era of looser financial regulations and higher interest rates. Both would benefit banks, whose net-interest margins—a key measure of lending profitability—rise with rates.
Shares of banks and insurers accounted for 73% of the S&P 500’s gains from Election Day through Friday, according to S&P Dow Jones Indices. Five stocks— Wells Fargo, Bank of America, J.P. Morgan Chase, Berkshire Hathaway and Citigroup—accounted for more than a third of the broad index’s gains through that time period.
Industrials also led the market’s rally, boosted by investors’ hopes that the Trump administration would ramp up infrastructure spending.
The sector has advanced more than 5% since Election Day, putting it ahead of the energy sector, which rose roughly 4% and the consumer discretionary sector, which rose more than 3% over the same time frame.
Caterpillar, the third best performer in the Dow Industrials since the election, has risen around 10% since Nov. 8.
Some investors cautioned that the stock market’s postelection gains have been built on assumptions that policies favorable to certain industries will be implemented in the coming year.
“Based on market fundamentals it’s not justified,” said Michael Cuggino, president and portfolio manager of the Permanent Portfolio Family of Funds, who called corporate revenue growth in the previous quarter “lackluster.”
While many investors are optimistic, “we don’t have anything concrete so far,” Mr. Cuggino added.
Stock valuations have risen since the election. The S&P 500 was trading at 20.1 times its last 12 months of earnings Friday, compared with 19.5 times on Election Day and its 10-year average of 15.7, according to the WSJ Market Data Group.
In government bond markets, the yield on the 10-year U.S. Treasury note settled lower at 2.335%, compared with 2.337% Friday. The 10-year note had posted its steepest two-week yield gain since 2001. Yields move inversely to prices.
“Our bond guys said the implementation of Trump’s platform will result in stronger economic growth, stronger inflation, and the Fed will tighten rates,” said Phil Orlando,chief equity market strategist at Federated Investors.
“When we saw that, we immediately increased our equity allocation and took it out of Treasurys,” he said, favoring economically sensitive U.S. stocks such as financials and industrials instead.
Financial shares rose 0.3% in the S&P 500 on Monday, while industrials added 0.5%.
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Major indexes rip to record closing highs as energy spikes 2%
U.S. equities closed higher on Monday, led by energy stocks, as oil prices rose on renewed optimism that OPEC was closing in on a deal to cut production.
“I don’t know if it will happen, but the market certainly hopes that it will,” said Robert Pavlik, chief market strategist at Boston Private Wealth, referring to a possible OPEC deal.
The three major indexes closed at record highs simultaneously for the first time since this past summer. The Dow Jones industrial average rose around 88 points, surpassing previous closing and intraday records of 18,923.06 and 18,934.05, respectively.
The S&P 500 topped its all-time intraday high of 2,193.81, hit on Aug. 15, during midday trade and closed at a record high as the energy sector gained 2.2 percent. The Nasdaq composite advanced 0.89 percent, also posting records on a closing and intraday basis.
“I think oil, and commodities in general, are leading the way for stocks,” said Peter Cardillo, chief market economist at First Standard Financial. He also said that crude prices received a boost from a weaker dollar.
U.S. crude for December delivery rose 3.9 percent to settle at $47.49 per barrel. The U.S. dollar index, which surged 2.24 percent last week to its highest level since 2003, traded 0.26 percent lower, around 100.9.
That said, Randy Frederick, vice president of trading and derivatives at Charles Schwab, said he expects oil prices to hold in a range roughly between $40 and $50 per barrel. “We’ve got high supply and slow-growing demand,” he said. “Any deal between OPEC would be shaky, as we’ve seen.”
There were no major economic reports due Monday. However, Federal Reserve Vice Chairman Stanley Fischer delivered remarks about how fiscal policy can help boost productivity and, in turn, lower the burden of supporting the economy on the central bank.
“Certain fiscal policies, particularly those that increase productivity, can increase the potential of the economy and help confront some of our longer-term economic challenges,” Fischer said.
The prospects of fiscal stimulus have risen sharply since Nov. 8, when Republican Donald Trump stunned the world by winning the U.S. presidential election. Investors and traders were quick to adjust positions, shifting large amounts of assets into sectors that would benefit from fiscal spending. They also piled into financials on hopes for deregulation within the sector.
Since Nov. 8, U.S. equities have seen a surge into record or near-record levels. But Stephen Wood, chief market strategist at Russell Investments, said a number of factors prior to the election primed the market to reach these levels. “We saw improvement in the inflation data, jobs and wages data and those factors sort of coalesced” with improving earnings, he said.
U.S. Treasurys, however, have taken a hit since the election, with the benchmark 10-year note yield breaking above 2 percent since then. On Monday, however, the 10-year note yield slipped to around 2.33 percent.
“When you get a knee-jerk reaction, it’s not surprising to see a pullback,” said Greg Woodard, managing director of fixed income at Manning & Napier. “Having said that, there is a trend for higher fiscal stimulus around the world, and that is supportive of higher yields.”
Later this week, which will be shortened by the Thanksgiving holiday on Thursday, the Fed is scheduled to release the minutes of its November meeting. That said, Schwab’s Frederick said the minutes are likely to have little impact on the market since the odds of a rate hike next month are so high.
According to the CME Group’s FedWatch tool, market expectations for a December rate increase were more than 95 percent.
Frederick also said he expects stocks to trade in a sideways pattern this week, given the holiday. “Traditionally, any holiday week is usually a low-volume week,” he said.
In corporate news, Tyson Foods shares plunged around 14 percent, after the firm reported weaker-than-expected quarterly results.
Overseas, European stocks mostly rose, with the pan-European Stoxx 600 index gaining 0.25 percent. In Asia, stocks closed mixed, with the Korean Kospi falling 0.43 percent and the Shanghai composite gaining 0.79 percent.
The S&P 500 gained 14 points, or 0.65 percent, to 2,196, with energy leading all sectors higher.
The Nasdaq rose 42 points, or 0.8 percent, to 5,363.
About three stocks advanced for every decliner at the New York Stock Exchange, with an exchange volume of 434 million and a composite volume of 2.280 billion in afternoon trade.
The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, traded lower, near 12.5.
Gold futures for December delivery rose $1.10 to settle at $1,209.80 per ounce.
On tap this week:
10:00 a.m. Existing home sales
8:30 a.m. Durable goods
8:30 a.m. Jobless claims
9:00 a.m. FHFA home prices
9:45 a.m. Markit Manufacturing PMI
10:00 a.m. New home sales
10:00 a.m. Consumer sentiment
2:00 p.m. Fed minutes
US markets closed
8:30 a.m. Trade deficit
9:45 a.m. Markit Services PMI
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