By Wallace Witkowski and Mark DeCambre, MarketWatch
Dow tops 300-point gain in final hour of trade, then
retreats
U.S. stocks closed higher Wednesday with the Dow industrials and
S&P 500 notching new records, shaking off early weakness in the
health-care sector to extend gains.
The Dow Jones Industrial Average marked its third consecutive
record close, surging 297.84, or 1.6%, to finish at 19,549.62,
following a fresh intraday record. Gains in Nike Inc.(NKE), Home
Depot Inc.(HD) and Visa Inc.(V) outweighed a slump in health-care
shares of Johnson & Johnson Inc.(JNJ), Pfizer Inc. (PFE) and
Merck & Co.(MRK)
The S&P 500 index , which also reached an intraday trading
high, closed at a record of 2,241.35, a gain of 29.12 points, or
1.3%, with all sectors except the health care--which finished down
0.8%--closing for a gain.
The Nasdaq Composite Index which had been trading in negative
territory earlier, turned higher, and finished up 60.76 points, or
1.1%, at 5,393.76, a few points shy of its record close set in late
November.
Meanwhile, the Russell 2000 index , a gauge of shares of
small-capitalization companies, closed at a record of 1,364.50,
after a gain of 11.84 points, or 0.9%. The index has climbed more
than 13% since the U.S. presidential election.
Highlighting how markets were broadly climbing, the Dow Jones
Transportation Average also closed at a record of 9,371.61, after
logging its first record intraday high in more than two years.
Health-care names tumbled early Wednesday after President-elect
Donald Trump threatened to cut drug prices
(http://www.marketwatch.com/story/president-elect-trumps-promise-to-bring-down-drug-prices-sends-biotech-etfs-slumping-2016-12-07).
"I'm going to bring down drug prices," Trump told Time in his
"Person of the Year" cover story
(http://time.com/time-person-of-the-year-2016-donald-trump/). "I
don't like what has happened with drug prices."
The iShares Nasdaq Biotechnology ETF(IBB), the most widely used
way to place bets on the biotech space, sank 3%.
The stock market's postelection ascent has been underpinned by
hopes that Trump will follow through with a slate of pro-business
policies, including boosting infrastructure spending and cutting
taxes for the wealthy.
Frank Cappelleri, executive director at Instinet LLC, said
investors caught flat-footed by the sustained rally following
Trump's unexpected Election Day win are still rotating into
stocks.
"Investors may see a few days of a pause as a reason to get back
involved," said Cappelleri. He said the second reason why this move
can extend higher is because investors betting on a downturn "are a
little gun-shy" after getting burned in November.
Other strategists say the market has traded in a relatively
narrow range since 2014 and make the case that the Trump rally has
only lasted a month and has a shot at moving higher into the end of
the year.
"It has only been about four weeks since the breakout for stocks
and a lot of people are looking at this to be quickly aborted, but
the market shouldn't be faulted for expecting more," said Bruce
Bittles, chief investment strategist at brokerage firm Robert W.
Baird & Co.
Another factor that may be supporting stock gains is the belief
that traditional selling patterns that occur at the end of the year
aren't being followed because investors are making bets on lower
taxes under a Trump administration.
"Anyone who has gained [in December] are not going to want to
sell their stocks and pay taxes in April 2017, when they can wait
till 2018," Bittles said. Of course, taxes on profits from the sale
of assets could be higher then, but Bittles says Wall Street thinks
that it makes more sense to wait and see, which is reducing
traditional selling of stocks to take year-end profits and
encouraging buying.
"It appears that nothing can stop the equity rally," said Naeem
Aslam, chief market analyst at ThinkMarkets UK, in a note.
However, some strategists and traders are concerned that a
pullback
(http://www.marketwatch.com/story/gundlach-says-the-trump-trade-is-losing-steam-2016-12-02)
might be in the offing because the market has climbed too fast and
too furiously.
Indeed, the CBOE Volatility Index is trading at just under 12,
which implies that investors may be getting complacent. "Buying
volatility at these levels may not be that much of a bad idea,"
Aslam said.
Read:Why the rally by U.S. stocks is 'just getting started'--in
one chart
(http://www.marketwatch.com/story/why-the-rally-by-us-stocks-is-just-getting-started-in-one-chart-2016-11-28)
Other markets:European stocks
(http://www.marketwatch.com/story/credit-suisse-miners-push-stoxx-europe-600-toward-highest-close-since-september-2016-12-07)
finished higher, with banks and miners among the session's big
winners, and Asian markets closed broadly higher
(http://www.marketwatch.com/story/bank-stocks-surge-as-asian-markets-post-gains-2016-12-06).
Oil futures
(http://www.marketwatch.com/story/oil-prices-continue-to-backtrack-as-investors-question-opec-deal-2016-12-07)
settled down 2.3% at $49.77 a barrel, while gold futures
(http://www.marketwatch.com/story/gold-snaps-back-to-back-drop-as-dollar-rally-stalls-ahead-of-central-bank-meetings-2016-12-07)
advanced 0.6% to settle at $1,177.50 an ounce while a key dollar
index
(http://www.marketwatch.com/story/dollar-flattens-out-as-investors-look-ahead-to-fed-ecb-meetings-2016-12-07)
slipped 0.3%.
Individual stocks: Ahead of the opening bell, Brown-Forman
Corp.(BFA) reported quarterly sales that topped estimates
(http://www.marketwatch.com/story/brown-forman-sales-top-estimates-sticks-with-full-year-view-2016-12-07),
as the maker of Jack Daniel's whiskey backed its full-year
forecast. Shares closed down 0.9%.
Handbag seller Vera Bradley Inc.(VRA) cut its full-year outlook
(http://www.marketwatch.com/story/vera-bradley-shares-slump-as-company-cuts-outlook-2016-12-07)
after missing its own guidance range for the third quarter. Shares
tumbled 13%.
Western Digital Corp.(WDC) shares jumped to close 8.3% higher
after the computer hardware maker raised its outlook
(http://www.marketwatch.com/story/western-digital-shares-up-nearly-5-as-company-raises-quarterly-estimates-2016-12-06)
late Tuesday.
Micron Technology Inc.(MU) shares rallied 7.3% after Citigroup
rated the stock a buy.
Shares of Under Armour Inc. (UA) surged after the athletic
apparel company changed its stock tickers
(http://www.marketwatch.com/story/under-armour-stock-tickers-change-prices-rally-2016-12-07).
Class A shares closed up 4.3%, and Class C shares rose 6.4%.
Economic news:Consumer credit in October
(http://www.marketwatch.com/story/growth-of-consumer-borrowing-slows-a-bit-in-october-2016-12-07)
rose $16 billion, but that was at the slowest pace since June.
The JOLTS report, or Job Openings and Labor Turnover Survey,
showed that job openings were unchanged at 5.5 million in October,
according to Labor Department.
Investors also are bracing for the European Central Bank's
policy-setting meeting
(http://www.marketwatch.com/story/how-italys-no-vote-might-be-the-ecbs-silver-lining-2016-12-05)
on Thursday. The Federal Reserve entered the so-called blackout
period Tuesday ahead of its meeting Dec. 13-14, so there are no Fed
speakers on the docket.
Check out:
--Victor Reklaitis in London contributed to this article.
(END) Dow Jones Newswires
December 08, 2016 07:28 ET (12:28 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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