A day after voters chose to send Donald Trump to the White House, the expectation of less austerity and more pro-business policies propelled the Dow Jones Industrial Average to a fresh all-time high.
The Dow easily sailed above its previous intraday record high of 18668 points at the opening bell, rising 218 points, or 1.18% by the close of trade. The index smashed a closing record of 18636.05 set back in August, ending the session at 18807.
The broader S&P 500 was slightly higher on the session, though the Nasdaq reversed course an hour into the trading day amid a steep selloff in technology companies. The tech-heavy index dropped 42 points, or 0.81%, to 5208. It had been down more than 1% during morning trade.
Shares of tech giants like Amazon (AMZN), Google (GOOGL), and Facebook (FB) plunged as worries lingered those companies could be hurt by long-term American protectionism and stricter immigration policies from a Trump administration.
The three major averages roared back to life during the prior session, as the Dow made up for steep pre-market losses of 867 points during heightened uncertainty about the outcome of the presidential election, to finish the trading session up 256 points, or 1.4%. The S&P 500 and Nasdaq Composite indexes also ended solidly in the green after notching losses of 5% during the overnight hours.
“The source of this bounce seems to be grounded in the differential between Trump’s economic and social policies,” said Joshua Mahony, IG market analyst. “With the promise of a tax repatriation scheme for multinationals, lower tax rates, and higher government spending, it seems the markets are waking up to the chance of a growth-driven economic period for the U.S.”
While tech shares sold off, the financials, industrials, and health care sectors led the way higher. Gains were propelled by several companies hitting fresh all-time highs including JPMorgan Chase (JPM), it’s second –straight day of records, PNC Financial Services (PNC), and Citizens Financial Group (CFG).
The rally in infrastructure-related investments has shown the market will react to whatever it hears from the soon-to-be President Trump, which means he will soon learn the power of his new pulpit, economists at Credit Suisse said.
“An increased likelihood of a boost to infrastructure-targeted government spending is positive for the growth outlook. However, infrastructure projects take considerable time to plan and initiate, and three-quarters of U.S. infrastructure spending is done at the state and local level, not the federal level,” they explained.
They therefore expect to see a spike in policy uncertainty in the short run, which could weigh on various economic measures like the purchasing manager indexes. However, to what degree they show an overly reactive pessimism, as happened in the United Kingdom immediately after the vote to exit the European Union, remains to be seen.
Overall, economists at Goldman Sachs (GS) are sticking with their forecast for an annualized growth rate of 2% in 2017, though they note much of that will hinge on how businesses and financial conditions react to Trump’s forthcoming policy proposals.