Boosted by "Trump rally," Dow hits new record

Last Updated Nov 10, 2016 4:14 PM EST

Investors who initially turned bearish at the idea of Donald Trump occupying the White House are rediscovering their bullish streak. 

The Dow Jones industrial average closed at a record high on Thursday, shooting up 218 points, or 1.2, percent to end at 18,218. That topped the Big Board’s last record-high on August 15, when it closed at 18,636 points. 

Banks and other financial companies led U.S. stocks mostly higher in afternoon trading Thursday. Consumer-focused companies, utilities and technology stocks were among the biggest decliners. The market was coming off a big rally following the election of Donald Trump as the next U.S. president.

Financial markets are rising on speculation that the Trump administration, backed by the Republican-controlled Congress, will ramp up public spending, as well as cut personal and corporate taxes, as he pledged during the presidential campaign. 

Investors think Trump “will have more success in implementing his domestic policy agenda in light of the Republicans’ retention of Congress,” Capital Economics said in a note. 

The upcoming Trump presidency, which will commence on Jan. 20, triggered a strong rally on Wednesday that extended somewhat into trading Thursday. Traders were focusing on Trump’s promises to boost U.S. economic growth through infrastructure spending and by cutting red tape, rather than uncertainties such as what he might do with trade agreements.

The Standard & Poor’s 500 index added 4 points to close at 2,167. The tech-heavy Nasdaq composite index lost 42 points, or 0.8 percent, to 5,209.

Before the election, markets had been worried about a Trump presidency because his campaign promises carried few policy details, making him an unknown quantity compared with rival Hillary Clinton.

“We had a gangbuster day yesterday; call it a Trump rally,” said Doug Cote, chief market strategist for Voya Investment Management. “Today we’re having a little breather, a little rest, but the key thing that will also keep the market going is the S&P 500 corporate earnings for the third quarter are positive for the first time in six quarters.”

Banks and other financial companies got a boost amid speculation that a Trump presidency could result in higher interest rates and less government regulation. JPMorgan Chase climbed $2.78, or 3.8 percent, to $76.03. Goldman Sachs rose $6.75, or 3.5 percent, to $199.38. Wells Fargo gained $3.01, or 6.3 percent, to $51, while Discover Financial Services added $3.03, or 5 percent, to $63.32.

Bond prices continued to fall, sending yields higher. Bond investors expect that Trump’s plans to increase spending on infrastructure while also lowering taxes will lead to stronger economic growth and possibly inflation, both of which are bad for bonds. 

Benchmark U.S. crude was down 50 cents, or 1.1 percent, at $44.77 a barrel in New York. Brent crude, used to price international oils, was down 39 cents, or 0.8 percent, at $45.97 a barrel in London.

The dollar has been fairly solid since Trump’s victory. The U.S. currency rose to 106.66 yen from 105.84 yen on Wednesday. The euro was down to $1.0892 from $1.0930. The Mexican peso continued to weaken against the dollar. One dollar now buys 20.50 pesos, more than the 19.87 pesos it bought late Wednesday. Investors worry that Trump’s anti-immigration stance and intention to repeal a trade pact with Mexico could hurt that country’s economy.