The Dow Jones Industrial Average stock market index breached 20,000 points on Wall Street for the first time on Wednesday, prompting US president Donald Trump to take to take to his Twitter account to hail the event.
“Great! #Dow20k” Mr Trump wrote, as he retweeted a report that the 121-year-old index, also know as the Dow, had finally breached the key psychological level.
The blue-chip index has surged by almost 10 per cent since Mr Trump won the election on November 8th, outpacing gains by the S&P 500 and Nasdaq Composite, amid expectations that the new president will push through a massive infrastructure spending programme, benefiting households and businesses. He signed executive orders on Tuesday to advance the construction of two oil pipeline projects that had been disrupted by his predecessor.
"The Dow is probably the most recognisable stock index for the man on the street, even if most people in the market focus on the S&P 500," said Aidan Donnelly, a senior equities analyst with Davy's private-clients arm. "It has certainly rallied on hope that Trump is going to initiate a lot of business-friendly policies and start fiscal spending, which is going to boost corporate earnings."
However, he said: “The market is taking a view that the glass is half full and going to fill even more. It’s sticking its fingers in its ears and closing its eyes to any less positive news that is out there. We will see how much of his promises have been delivered on after 100 days in office.”
Corporate earnings
The Dow, which is comprised of just 30 stocks from IBM to Apple and Caterpillar, had made a number of attempts to breach 20,000 points in the past month. However, it has benefited most recently from a slew of better-than-expected corporate earnings reports and outlooks, including Goldman Sachs, McDonald's and Boeing, in the past week.
Mounting signs that growth is set to accelerate globally this year, with the World Bank predicting the world economy will expand by 2.7 per cent in 2017 from 2.3 per cent in 2016, have stoked expectations of inflation and US interest-rate hikes, prompting big fund managers to sell some of their bond holdings and switch into equities.
However, some Dow components are beginning to feel the impact of the dollar strengthening against other major currencies since the US election. On Tuesday, healthcare giant Johnson & Johnson accompanied a strong set of 2016 results by forecasting lower-than-expected profit for this year, as a result of the stronger dollar.
Over on this side of the Atlantic, the Iseq has risen by 8 per cent since the US election, with CRH, which comprises 30 per cent of the benchmark, having soared over 14 per cent on expectations it will benefit from Mr Trump's infrastructure spending plans. The construction material giant's Atlanta-based Oldcastle division is the biggest producer of asphalt for highway construction in the US.
Trump helps CRH shares surge: page 4
