U.S. stock markets closed higher on Monday maintaining the impressive rally of the previous week. The post-election rally continues as market participants remained bullish that the president-elect Donald Trump’s protectionist policies will benefit U.S. economy. Moreover, interest rate cut by the Fed for two consecutive FOMC meetings significantly boosted investors’ confidence in risky assets like equities. All three major stock indexes ended in positive territory.
How Did The Benchmarks Perform?
The Dow Jones Industrial Average (DJI) rose 0.7% or 304.14 points to close at 44,293.13, marking its first closing high above the key technical level of 44,000 in history. In intraday trade, the blue-chip index touched an all-time high of 44,486.70. Notably, 15 components of the 30-stock index ended in positive territory while 15 in negative zone.
The tech-heavy Nasdaq Composite finished at a record-high of 19,298.76, rising 0.1% due to strong performance by corporate giants. In intraday trading, the tech-laden index posted an all-time high at 19,366.07. The major gainer of the tech-laden index was Tesla Inc. TSLA.
Stock price of the global leader for manufacturing electric vehicle jumped 9%. Tesla currently sports a Zacks Rank #1 (Strong Buy). You can see
the complete list of today’s Zacks #1 Rank stocks here
.
The S&P 500 gained 0.1% to finish at 6,001.35, marking its first close above the key psychological barriers of 6,000. In intraday trade, Wall Street’s benchmark recorded an all-time high of 6,017.31. Six out of 11 broad sectors of the broad-market index ended in positive territory while five in negative zone.
The Consumer Discretionary Select Sector SPDR (XLY) and Financials Select Sector SPDR (XLF) advanced 2% and 1.4%, respectively. On the other hand, the Real Estate Select Sector SPDR (XLRE) dropped 0.9%.
The fear-gauge CBOE Volatility Index (VIX) was down 0.2% to 14.97. A total of 15.4 billion shares were traded on Monday, higher than the last 20-session average of 12.8 billion. The S&P 500 posted 117 new highs and 7 new lows, while the Nasdaq registered 363 new highs and 86 new lows.
Several Positive Catalysts
The resounding victory of Donald Trump as the 47th president of the United States of America boosted market participants’ confidence on U.S. stocks. Trump’s protectionist policies, to strengthen U.S. industries, especially the manufacturing sector bodes well for investors.
Although we are still not clear about economic policies (especially imposition of tariff and lowering of corporate tax) of the president-elect Donald Trump for his second term, the overall movement of Wall Street is likely to remain northbound due to the three main drivers.
First, the fundamentals of the U.S. economy are rock-solid. The U.S. GDP grew at 1.6%, 3% and 2.8%, respectively, in the first three quarters of 2024. On Nov 7, the Atlanta Fed GDPNow tracker estimated a 2.5% GDP growth for the fourth quarter. These numbers are higher than the pre-pandemic period.
Second, as of Nov 8, 452 S&P 500 companies have reported their quarterly financial numbers. Total earnings of these companies are up 7.1% year over year on 5.5% higher revenues, with 73.5% beating earnings per share (EPS) estimates and 61.5% beating revenue estimates.
Third, The Fed reduced the benchmark lending rate by 25 basis-points in its November FOMC meeting after cutting an aggressive 50 basis-points in the fed fund rate in September. The Fed fund rate is currently in the range of 4.50-4.75% compared with a 23-year high of 5.25-5.5% till mid-September.
The CME FedWatch interest rate derivative tool currently shows that market participants have provided a 70% probability of another 25 basis-point rate cut in December.
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