Thu | Sep 21, 2017

Dow sets record high, oil slumps

Published:Friday | November 11, 2016 | 11:00 AM

Banks and other financial companies led US stocks mostly higher on Thursday, propelling the Dow Jones industrial average to a record high.

The Standard & Poor's 500 index, a broader measure of the stock market, also eked out a gain, adding to a big rally the day before following Donald Trump's presidential election victory. The Nasdaq composite closed lower, weighed down by a slide in technology companies. Bond prices slumped again, sending yields higher.

"You are seeing a massive swing out of cash and fixed-income and into equities to take advantage of this pro-growth cycle that the market believes we're beginning," said David Lyon, global investment specialist at J.P. Morgan Private Bank.

The Dow climbed 218.19 points, or 1.2 per cent, to 18,807.88. That's a gain of about 1 per cent from the average's previous record high set on August 15. The S&P 500 index added 4.22 points, or 0.2 per cent, to 2,167.48.

The Dow and S&P 500 index are on a four-day winning streak. The tech-heavy Nasdaq lost 42.28 points, or 0.8 per cent, to 5,208.80.

Investors continued to make moves based on the bevy of possible policy changes that the Trump administration could implement once it takes over in January. Those include cutting taxes, increasing infrastructure spending, and slashing government regulation of businesses.

That's particularly given a boost to financial, industrial, and health-care stocks, while prompting traders to sell consumer goods companies, utilities and phone companies. Investors have also continued to pull out of bonds in anticipation that Trump's policies could usher in a stronger economy and, possibly, higher inflation, both of which are bad for bonds.

The sell-off in bonds continued on Thursday, sending bond prices lower and kicking the yield on the 10-year Treasury note up to 2.15 per cent, the highest it's been since January, from 2.06 per cent late on Wednesday. That yield is a benchmark used to set interest rates on many kinds of loans, including home mortgages.

Traders have been selling bonds more aggressively to hedge against the possibility that interest rates, which have been ultra-low for years, could rise steadily again under Trump's administration.

That scenario would favour banks and other financial companies, one reason why the sector continued to rally on Thursday. Higher interest rates help banks earn more money from lending, and years of ultra-low rates have crimped profits at big banks.

In the energy market, crude oil prices declined. Benchmark US crude fell 61 cents, or 1.3 per cent, to close at US$44.66 a barrel in New York. Brent crude, used to price international oils, lost 52 cents, or 1.1 per cent, to close at US$45.84 a barrel in London. Natural gas lost 6 cents, or 2.2 per cent, to close at US$2.63 per 1,000 cubic feet.

- AP