Dow +1508.05 at 43729.93, Nasdaq +544.29 at 18983.46, S&P +146.28 at 5929.04
The S&P 500 closed up +2.53%, the Dow closed up +3.57%, and the Nasdaq closed up +2.74%.
There was no mistaking that the stock market thought the election outcome would be good for growth. Following the news that Donald Trump won the presidential election and polling indications that the GOP is likely to hold a majority position in the House and Senate, the major indices operated in rally mode on Wednesday.
There was the relief factor, with participants enthused that this wouldn’t be a contested election, and there was the growth factor, with participants thinking that President-elect Trump’s aim to lower tax rates and decrease regulations will foster economic growth that remains above potential.
That view of policy matters manifested itself in a variety of ways:
- Small-cap stocks soared
- Financial stocks soared
- The U.S. dollar surged against other major currencies
- Bitcoin prices moved noticeably higher
- Cyclical sectors outperformed
- Treasuries were sold, sending yields higher
Today’s active buying interest sent the Dow Jones Industrial Average, Nasdaq Composite, S&P 500, and S&P 400 to record highs. The Russell 2000 didn’t quite reach that heady territory, but it led all indices with a material 5.8% gain.
The S&P 500 financial sector (+6.2%) was in good spirits, relishing the thought that regulatory oversight will be reduced and that growth optimism will spur increased capital markets activity. Goldman Sachs (GS 596.29, +69.33, +13.2%), KeyCorp (KEY 19.97, +2.70, +15.7%), and Discover Financial Services (DFS 182.63, +30.78, +20.3%) were laudable proxies capturing that upbeat view.
There were many “big winners” today. Tesla (TSLA 288.53, +37.09) was among them, capitalizing on the idea that Elon Musk’s strong support of Donald Trump will be an added boon for the company. Nucor (NUE 167.74, +23.13, +16.0%) and other steel stocks, expected to benefit from tariff protections under a Trump administration, also made significant gains.
Tesla’s gain fueled a 3.6% increase in the consumer discretionary sector, which joined the financial, industrials (+3.9%), and energy (+3.5%) sectors to lead the S&P 500. However, it wasn’t a clean sweep for the S&P 500 sectors.
Treasuries had a tough session. Selling kicked in overnight in response to the election results, sending the 2-year note yield as high as 4.29% and the 10-year note yield as high as 4.48%. Growth optimism intermingled with worries about inflation and continued deficit spending, driving up the national debt.
The behavior of Treasury yields will remain a focal point Thursday when the FOMC announces its policy decision at 2:00 p.m. and Fed Chair Powell holds his press conference at 2:30 p.m. ET. The FOMC is widely expected to cut the target range for the fed funds rate by 25 basis points to 4.50-4.75%.
Gold and silver got hammered today, probably overbought. Dollar and rates up.
However, Bitcoin hit all-time highs (BITX is my favorite play there). Maybe the “store of value” is moving to outright crypto speculation.
The Russell 2K broke out on its highest one-day volume since February.
October was rocky, but as I keep saying, I’m very bullish about stocks into year-end. Setups are coming soon. Many software companies will report earnings soon. NVDA (chips) reports in 2-3 weeks.
Check P&L on my my website for stop changes.