Dow pops 20,000 and raises hopes rally is recharging

Wed Jan 25, 2017 2:05pm EST
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By Rodrigo Campos and Chuck Mikolajczak

NEW YORK (Reuters) - The Dow Jones Industrial Average .DJI index's pop over 20,000 on Wednesday crowns a frenetic post-U.S. election rally that featured the second fastest-ever climb between 1,000-point milestones in the Dow's 120-year history.

The rally, driven by enthusiasm over pro-growth policies from newly-minted U.S. President Donald Trump and an optimistic start to earnings season, has led to some speculation that stocks have run up too far. Analysts and investors, however, remain optimistic that the nearly nine-year bull run in equities will continue as long as the economy and corporate profits continue to show growth.

"While the Dow hitting 20,000 is one of the least meaningful data points on my screen, it does suggest that the equity rally is pretty broad based," said Michael Purves, chief global strategist and head of derivatives research at Weeden & Co. "What's important is that the Dow is going up."

The 42-session surge from the first close above 19,000 was driven by financial stocks, specifically Goldman Sachs (GS.N: Quote) and JPMorgan Chase (JPM.N: Quote), which were together responsible for more than 20 percent of the move.

The fastest move between these thousand point milestones was 24 trading days between 10,000 and 11,000, from March 29 to May 3 of 1999. The rise from 18,000 to 19,000 took the Dow 483 trading sessions.

Much of the gains have come from stocks expected to benefit as the administration moves to put its policies in place.

Banks have been among the best performers since the Nov. 8 election of Trump, as investors bet that his expected fiscal stimulus will trigger inflation and bring higher interest rates.

The largest contributor to the index's run from Nov. 22 was Goldman, which has single-handedly added over 170 points. Goldman is the only Dow component stock that trades above $200, so its influence in the price-weighted index is naturally larger.   Continued...

News of the Dow Jones Industrial average passing 20,000 plays on television at a Fidelity Investments office in Cambridge, Massachusetts, U.S., January 25, 2017.   REUTERS/Brian Snyder