U.S. equities traded sharply higher on Wednesday, with the Dow Jones industrial average climbing above 21,000 for the first time, on the back of President Donald Trump’s speech to Congress.
Trump’s speech, which was delivered Tuesday night, was widely praised for its positive tone but lacked specifics about tax reform and deregulation, two key components of the market’s postelection rally.
“I think this is optimism related to the speech and to optimism about the administration’s ability to push through its agenda,” said Tom Wright, director of equities at JMP Securities. “There was always this nagging concern” that they were going to have trouble doing so.
The Dow advanced more than 200 points with Goldman Sachs contributing the most gains. The 30-stock index first closed above 20,000 on Jan. 25.
The S&P 500 climbed 1 percent, with financials rising 2.4 percent to lead advancers. The Nasdaq jumped 0.93 percent.
Quincy Krosby, market strategist at Prudential Financial, said the speech’s tone “has gone a long way for the market” as it “assuaged fears that his agenda was not going to be able to be passed.”
Dow futures soared more than 150 points ahead of the open, while S&P and Nasdaq futures advanced 18 and 34 points, respectively.
“While it’s understandable that these things take time to plan and implement properly, markets have been way ahead of the game since Trump’s victory and there comes a time when we need to know exactly what they’re rallying on,” said Craig Erlam, senior market analyst at Oanda, in a note.
Equities had closed lower on Tuesday, with the Dow snapping a 12-day winning streak.
Investors also paid close attention to key economic data, as the probability of the Federal Reserve raising rates surged.
Personal income rose 0.4 percent in January, topping expectations, while consumer spending slowed. However, the personal consumption expenditures (PCE) price index jumped 1.9 percent in the 12 months through January, putting inflation very close to the Federal Reserve’s target of 2 percent.
Construction spending fell 1 percent in January, well below expectations, but the February ISM manufacturing index rose to 57.7, expanding on January’s 56.0 reading. The Fed’s beige book will be released at 2 p.m.
Market expectations for a rate hike this month almost doubled to around 70 percent, according to the CME Group’s FedWatch tool.
Also lifting March rate hike expectations were remarks from New York Fed President William Dudley, who told CNN International on Tuesday that he sees a rate hike in the “relatively near future,” adding that the case for tighter monetary policy has become more compelling.
“I disagree with those who think the Fed doesn’t matter anymore in terms of their influence in the context of a debt to GDP ratio that has never been higher and market valuations that are historically very rich,” said Peter Boockvar, chief market analyst at The Lindsey Group.
“Changes in fiscal policy are welcome for the economy but I lean towards monetary policy in being more impactful on markets in the shorter term time horizon,” he said.
U.S. Treasury yields rose broadly, with the two-year note yield hitting its highest level since 2009 and the benchmark 10-year note yield jumping to 2.46 percent.
On tap this week:
Monthly vehicle sales
Earnings: Planet Fitness, Lowe’s, Windstream, Luxottica
1:00 p.m. Dallas Fed’s Kaplan
2:00 p.m. Fed’s Beige Book
6:00 p.m. Fed Gov. Lael Brainard
Earnings: Costco, A-B InBev, Ambev, Toronto-Dominion Bank, JD.com, Kroger, Burlington Stores, Autodesk, American Outdoor Brands, Wingstop, Barnes and Noble, Abercrombie and Fitch
8:30 a.m. Jobless claims
7:00 p.m. Cleveland Fed President Loretta Mester
Earnings: WPP Group
9:45 a.m. Services PMI
10:00 a.m. ISM nonmanufacturing
10:15 a.m. Chicago Fed President Charles Evans, Richmond Fed President Jeffrey Lacker
12:15 p.m. Fed Gov. Jerome Powell
1:00 p.m. Federal Reserve Vice Chairman Stanley Fischer at Monetary Policy Forum
1:00 p.m. Fed Chair Janet Yellen, Executives Club of Chicago on outlook, with Q&A
Dow breaks above 21000 as stocks hit all-time highs after Trump’s speech; financials lead – CNBC