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World stocks rise as Dow passes 20,000 points

/ 08:39 AM January 26, 2017
Financial Markets Wall Street

A screen on the floor of the New York Stock Exchange shows the closing number for the Dow Jones industrial average, Thursday, Aug. 27, 2015. AP FILE

NEW YORK, United States — The Dow Jones Industrial Average, the most famous equity index benchmark on Wall Street, shot above 20,000 for the first time Wednesday.

The blue-chip stock index quickly blew through the much-anticipated milestone in the opening seconds of trading and rose further as the day progressed. It closed at 20,068.51, up 0.8 percent.

The new record, which helped spur other leading global stock indices higher, culminates a US rally begun in the wake of US President Donald Trump’s election, in anticipation he will produce pro-growth policies, but which stalled in the weeks leading up to the inauguration.

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The surge was the latest sign that investors are brushing aside worries about Trump’s bent towards trade protectionism and divisive social policies as it fixates on expectations the White House and Republican Congress will produce tax cuts, infrastructure spending, and reduced regulations.

The broad-based S&P 500 also rose 0.8 percent to 2,298.37, while the tech-rich Nasdaq Composite Index advanced 1.0 percent to 5,656.34, both new records.

Equity markets in Frankfurt, Paris and Tokyo all gained 1.0 percent or more. Gains in London were a more modest 0.2 percent as the British pound advanced.

Sam Stovall, chief investment strategist at research firm CFRA, said it was a “monumental day,” and though Wall Street could retreat somewhat, it would not fall sharply.

“I think people are feeling encouraged by (Trump’s) actions to date,” Stovall said.

JJ Kinahan, chief market strategist at TD Ameritrade, hailed the news, posting a picture to his Twitter account showing him toasting “Dow 20K” with a glass of champagne and fireworks in the background, although the milestone may be largely symbolic.

“It’s exciting, but in the grand scheme, I don’t think it means much,” Kinahan said.

Key gainers in the 30-member Dow included Boeing, which rose 4.2 percent after reporting better-than-expected fourth-quarter earnings; and Caterpillar, which gained 2.0 percent ahead of its earnings report Thursday. United Technologies, which slightly beat expectations, fell 0.6 percent.

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Bullish momentum returns

In crossing the 20,000 threshold after many failed tries, the market regained its mojo after the post-election rally stalled.

Analysts said the shift was triggered by Trump’s announcements Tuesday to advance two major pipeline projects that had been blocked by former president Barack Obama.

Investors also are excited about tax cuts, which could have a direct impact on lifting corporate profits, and enhanced public works spending, which could boost US growth.

Briefing.com analyst Patrick O’Hare said the rally also spurred more stock buying by investors who were caught off guard in what he dubbed “FOMO” or the “fear of missing out.”

The latest milestone follows a series of landmarks reached during the Obama years, which were characterized by slow but steady economic growth after the 2008 financial crisis. The blue-chip index bottomed out in September 2009, falling below 6,600 points.

Market shrugs at controversy

The renewed market confidence suggests investors are shrugging off worries about Trump, including fears he will ignite a trade war with protectionist policies.

On Wednesday afternoon, Trump ordered work to begin on a wall on the Mexican border to keep out immigrants, moving to fulfill a campaign promise that pleased his political base but has been criticized as unnecessary and mean-spirited, as well as a misuse of funds.

But Kinahan said some of Trump’s controversial policies, such as trade protectionism, may be “bargaining chips” as his agenda moves through Washington.

“He’s been in real estate his whole life so he’s all about compromise,” he said. “The more things you throw out, the more bargaining chips you have.

Kinahan said investors also are hedging in case the market pulls back, a shift that is most visible in the popularity of “put” options that stocks will fall. CBB

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