Dow breaks through 20,000 milestone
The Dow Jones industrial average crossed the 20,000 mark for the first time Wednesday, the latest milestone in a record-setting drive for the stock market.
Strong earnings from Boeing and other big companies helped push the Dow past the threshold early on and had US stocks solidly higher by afternoon. The Standard & Poor's 500 index and Nasdaq composite were on course for record highs of their own after each closed at all-time highs on Tuesday.
Financial stocks were leading the gainers, while real estate, phone companies and other high-dividend stocks were among the biggest laggards as bond yields rose.
The Dow, which tracks 30 major industrial companies, gained 165 points, or 0.8 per cent, to 20,078 as of 2:26 p.m. Eastern Time. The S&P 500 index rose 18 points, or 0.8 per cent, to 2,298. The Nasdaq added 52 points, or 0.9 per cent, to 5,653.
The market has been marching steadily higher since bottoming out in March 2009 in the aftermath of the financial crisis. The rally continued after the election of Donald Trump as US president last fall. The Dow first closed above 10,000 on March 29, 1999.
Wednesday's rally comes against a backdrop of optimism on Wall Street that executive actions and policy goals announced by the Trump administration this week on trade, manufacturing and business deregulation will be good for corporate America.
"Whether it's tax reform or infrastructure spending, any of those tend to be optimistic conversations for the markets currently," said Darrell Cronk, president of Wells Fargo Investment Institute. "We have to wait and see how they play out, obviously. The danger here, if there is one, is that the market gets ahead of itself a little bit."
Most professional investors are sceptical the Dow at 20,000 will have much effect on the market. They more often look to the S&P 500 index as a benchmark, because they consider it better representation of the broad market.
"In and of itself, it is just a number," said Quincy Krosby, market strategist at Prudential Financial. "But what it does is it lifts market expectations, in essence, to continue moving higher."
If the Dow reaching 20,000 has any impact, it will likely be a psychological one. Investors have been leery of the stock market for years, unable to stomach the prospect of losing more than 50 per cent of their money for a second time if another financial crisis hits.
That trepidation has caused them to pull money out of stock funds — even as the Dow made its march towards 20,000 — and depend instead on safer bond investments.
Last year, investors pulled a net US$27.1 billion out of US stock mutual funds and exchange-traded funds, according to Morningstar. A year earlier, they yanked US$66.5 billion. Over the same time, investors plugged a total of US$218.6 billion into taxable bond funds.