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Dec 28, 2016

Wall Street at Close Report on December 28, 2016: Stocks Finish Lower, Dow Closes Down Triple Digits for Only Second Time Since Election

Antonio José Vielma

U.S. stocks held lower and the Dow Jones industrial average fell as much as 113 points Wednesday as investors watched the elusive 20,000 mark slowly slip away.

The Dow could not avoid its second triple-digit loss since the election. Now, investors are beginning to lose hope in seeing the Dow hit 20,000 before New Year's.
"I think Santa is checking into a home," Art Cashin, director of floor operations at UBS said. When asked if the Dow would reach the 20,000 mark this year, he replied, "I don't think so."
Cashin had told CNBC last Friday there was a 50/50 chance of the benchmark average surpassing the milestone before the end of the year.
"It's selling into a vacuum here. There's not much bidding going on. They tried and now there's the weight of the potential end of year selling…I thought this was their last best chance. They should be under negative pressure for the last two days (of the year)," Cashin said.
The Dow opened slightly higher before turning negative. The only gainer of the group was Travelers Companies, which was up less than a tenth of a percent. On the other hand, Caterpillar and Boeing pushed the Dow down, accounting for 11 and 9 points against the index, respectively.

Investors were expecting a positive day, citing a lack of "macro news" and the possibility of oil powering the Dow over the 20,000 milestone. Now, it appears the Dow Jones transportation average is having an effect on stocks, down more than 1 percent with every constituent having gone negative.
"There is a wave of optimism that's taken over Wall Street since the election either from the Trump trade or from a better sentiment of the prospects for U.S. economic growth in 2017," Kevin Mahn, president and chief investment officer of Hennion & Walsh Asset Management, said.
Mahn said he thinks the market has "raced up too high too fast" and is taking a breather. A lot of the gains from early 2017 may have taken place already, he said, and without very many specifics from President-elect Donald Trump on how his administration will grow the economy.
The president-elect's team said on the transition call Wednesday morning that Trump is expected to release an "economic development message" after the market closes. The announcement will be "very positive for American workers," his team said.
To put things in perspective, Wednesday marks the 10th trading session since the Dow first came within 0.25 percent of 20,000. Although it only took one trading session for the benchmark average to cross 19,000 after first coming within 0.25 percent of it, that hasn't been the case with other recent milestones.
It took 12 trading sessions for the Dow to gain the last 0.25 percent until finally surpassing the 18,000 milestone. Before it crossed over the 17,000 mark in July 2014, investors had to bear through 18 trading sessions of being within a quarter percent of the level.
The S&P 500 was down more than half a percent after every sector turned negative. The NASDAQ was also down about three quarters a percent.
On the data front, On the data front, pending home sales fell, driving the National Association of Realtors Home Sales Index down 2.5 percent in November from October. Consensus forecasts called for a 0.4 percent increase in home sale contracts signed but not yet closed, following a 0.1 percent rise in October.
The Mortgage Bankers Association did not publish its weekly survey of U.S. mortgage rates and home loan application activity on Wednesday. Instead, it will release results from the previous two weeks on Jan. 4.
The Treasury Department auctioned $34 billion in 5-year notes at a high yield of 2.057 percent, resulting in the strongest demand for those notes since November 2014. The 5-year yield was 2.06 ahead of the note auction, but fell to 2.018 percent almost immediately afterwards.

"We expected a soft reception for the 5-year as it's the most sensitive to Fed hike path and year-end was likely to exact a toll on risk appetite," Aaron Kohli of BMO Capital Markets said. "The auction was fairly strong despite the lack of a concession with the indirect bidding really carrying the day."

Treasury yields turned lower, with the 10-year yield near 2.52 percent and the 2-year yield around 1.27 percent.
The U.S. dollar index was higher against the euro and yen.
Oil prices opened higher Wednesday morning, close to their mid-2015 peaks. The market anticipated tighter supply and the first output cut deal between OPEC and non-OPEC producers in 15 years, which is set to take effect Sunday.
U.S. markets were closed Monday in observance of the Christmas Day holiday, and are closed again next Monday to commemorate New Year's Day. Last Friday, the Dow Jones industrial average posted its first seven-week win streak in two years and was within 70 points of breaking the psychologically key 20,000 mark.
On tap this week:

8:30 a.m. Initial claims

8:30 a.m. International trade


9:45 a.m. Chicago PMI

*Planner subject to change.
—CNBC's Peter Schacknow, Christopher Hayes and Evelyn Cheng contributed to this report.
Correction: This story was revised to delete the incorrect starting date of the Santa rally.