Dow hits record, topping 21,000 for first time
The Dow Jones Industrial Average topped 21,000 points for the first time, with the blue-chip index reaching the milestone a scant five weeks after breaching the 20,000 mark.
Stocks shot out of the gate on Wednesday, led by big gains in banks as investors expected interest rates to rise. Financial markets also seemed to take comfort in President Trump’s speech last night to a joint session of Congress.
The Dow soared 303 points, or 1.5 percent, to close at 21,116, a new record. The Standard & Poor’s 500 index added 32 points, or 1.4 percent, to 2,396. The Nasdaq composite increased 79 points, or 1.3 percent, to 5,904. All three indexes are at all-time highs.
Among investors, expectations are rising that the Federal Reserve could move to raise short-term interest rates at its next two-day policy meeting on March 14-15. The fed funds futures market puts the likelihood of a hike at 69 percent, up from only 35 percent on Tuesday, according to PNC Financial Services Group.
“President Trump’s address to the joint session of Congress last night was positive in tone and policy priorities, but lacked details and any legislative time frame,” analysts with TD Securities said in a report. “As a result, markets have largely pivoted back to focus on the Fed, which is a more important driver for rates and the [dollar].”
In his speech, Trump struck a less confrontational tone than usual and steered away from dramatically negative descriptions of the state of the U.S. economy. He also reiterated his pledges to reform taxes, slash red tape and ramp up spending on defense and infrastructure projects. The promises have helped send U.S. stock benchmarks to records, but Trump offered little by way of detail.
JPMorgan Chase rose 2.6 percent and Goldman Sachs rose 2.1 percent, the biggest increases in the Dow.
Bond prices fell and yields rose after a Federal Reserve official, New York Fed President William Dudley, said the case for raising interest rates had gotten stronger. The yield on the 10-year Treasury note rose to 2.45 percent.
Ryan Detrick, senior market strategist with LPL Financial, thinks stocks are overvalued, but he notes that the push into record terrain has been driven by improved corporate profits.
“This helps justify the gains, as it isn’t all based on hopes for tax reform or infrastructure spending,” he said in a note. “There is real economic improvement now that has sparked much of the rally.”
If the Dow closes above 21,000, it will have taken 24 days for the index to gain a thousand points, according to LPL. The only other time that happened so quickly was during the internet boom in 1999, when the Dow rose from 10,000 to 11,000.