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Nov 10, 2016

Wall Street Closing Report on November 10, 2016: Dow Rips to All High as Investors Embrace Trump Presidency, by Fred Imbert

cnbc.com
 
Fred Imbert
 
U.S. equities closed mixed on Thursday as investors repositioned their portfolios following the presidential election.

The Dow Jones industrial average hit a new all-time intraday of 18,873.6, and closed more than 200 points higher, with IBM and Goldman Sachs contributing the most gains to the tune of 34 points and 52 points, respectively.

"Equities are adjusting to change and uncertainty with a Trump presidency," said Terry Sandven, chief equity strategist at U.S. Bank Wealth Management. "There still needs to be more clarity and that's going to impact equity prices."

The Nasdaq composite underperformed, erasing earlier gains and briefly falling 2 percent as the iShares Nasdaq Biotechnology ETF (IBB) pared initial gains while the so-called FANG stocks (Facebook, Amazon, Netflix and Alphabet) fell. The index closed around 0.8 percent lower.
"These are expensive stocks that don't like higher interest rates. These have been the leaders and the leaders are getting whacked," said Peter Boockvar, chief market analyst at The Lindsey Group. He said that FANG stocks "don't like higher interest rates because higher interest rates exposes things that are overvalued."
The S&P 500 gyrated between gains and losses, closing about 0.2 percent higher, with financials rising 3.7 percent to lead advancers. Bank stocks rose, with the SPDR S&P Bank ETF (KBE) holding about 4 percent higher after hitting its highest level since September 2008.

Donald Trump's victory over Democrat Hillary Clinton sent shock waves through global financial markets, with Dow futures falling more than 800 points as election results kept coming in. But Wednesday's cash session saw a 1 percent rally, as investors and traders unwound several trades associated with a Clinton victory, particularly within the financials and health care sectors.
Traders on the floor of the New York Stock Exchange.
Brendan McDermid | Reuters
Traders on the floor of the New York Stock Exchange.
"There are three things you need to contemplate. First, the lessons learned from Brexit," said Art Hogan, chief market strategist at Wunderlich Securities. "We know what happens in a Brexit-like sell-off. You get a knee-jerk reaction to the downside and then we move higher very quickly; we just sped up the process on that."
"Second, it's the fact that we got conciliatory speeches from both candidates," he said. "Third, you have the potential for growth policies to be put forward" with Republicans controlling the White House and Congress.
Investors were also on the lookout for any updates on who would compose Trump's cabinet. Earlier on Thursday, CNBC reported that Trump's advisers have floated the idea of naming Jamie Dimon as Treasury secretary, according to two people familiar with the matter.
U.S. Treasury yields continued their assent as well, with the two-year note yield around 0.92 percent and the benchmark 10-year yield at 2.14 percent.
The dollar index, which measures the U.S. currency's performance against a basket of currencies, rose 0.31 percent Thursday, with the euro near $1.089 percent. The safe-haven yen fell more than 1 percent versus the greenback, trading around 106.80.
Lukman Otunuga, research analyst at FXTM, said the dollar's "resurgence was also complimented by the renewed speculations of the Federal Reserve raising US interest rates in December that encouraged buyers to attack. This week's aggressive dollar rebound may be fully Trump driven with more time needed for the Greenback to find some normality."

Market expectations for a Fed rate hike in December were around 76.3 percent Thursday afternoon, according to the CME Group's FedWatch tool.
Overseas, Mexican and Brazilian equities fell sharply Thursday, along with most emerging markets. The iShares MSCI Mexico Capped ETF (EWW) and the Brazil Capped ETF (EWZ) fell more than 8 percent and 7.9 percent, respectively, while the broader iShares MSCI Emerging Markets ETF (EEM) slipping more than 2.5 percent.
"What's happening here is the Fed is still expected to move this year and yields and the dollar are moving higher," said Peter Cardillo, chief market economist at First Standard Financial.
Japan's Nikkei 225 rose nearly 7 percent, while European equities traded lower, with the pan-European Stoxx 600 index slipping 0.4 percent.

On the data front, weekly jobless claims totaled 254,000, below the expected 260,000. Meanwhile, St. Louis Fed President James Bullard said the central bank is still due for a single rate hike and then hold.
The Dow Jones industrial average gained 218.19 points, or 1.17 percent, to close at 18,807.88, with JPMorgan Chase leading advancers and Procter & Gamble the biggest decliner.
The S&P 500 gained 4.22 points, or 0.2 percent, to end at 2,167.48, with finanicals leading six sectors higher and consumer staples lagging.
The Nasdaq composite fell 42.28 points, or 0.81 percent, to 5,208.80.
The Dow Transports rose 1.9 percent, hitting a more than one-year high, led by Avis Budget Group, which rose 5.48 percent.
Decliners were a step ahead of advancers at the New York Stock Exchange, with an exchange volume of 1.423 billion and a composite volume of 6.344 billion at the close.
U.S. crude for December delivery fell 1.35 percent, or 61 cents, to settle at $44.66 per barrel. Gold futures for December delivery fell $7.10 to settle at $1,266.40 per ounce.
On tap this week:

Thursday

Earnings: Disney, AstraZeneca, Siemens, Michael Kors, Nordstrom, SodaStream, Nvidia, Petrobras, Blue Buffalo, Sunrun
2:00 p.m. Federal budget
Friday
Veterans Day

Bond market closed, stock market normal hours
Earnings: Allianz, JC Penney, Brookfield Asset Management

10:00 a.m. Consumer sentiment