A Trump tweet ends 30-day oil rally and Dow closed above its January 26 high.
Wall Street’s leading indexes closed at fresh highs as investors backed returns from booming US economy ahead of downsides from the US-China trade war.
The Dow Jones Industrial Average for the first time closed above its January 26 high as nearly all 30 stocks rose, from tech giants Apple and Microsoft to trade-sensitive stocks such as Boeing and Caterpillar.
The broad gains also pushed up the S&P 500 above its August 29 record.
The major indexes are rising alongside a recent jump in bond yields, a sign the market is shrugging off the impact of the US Federal Reserve’s pace of economic tightening. A market survey says there’s a 94% chance of the Fed raising rates at next week’s meeting.
“The good economic news has put us into a bit of a momentum streak,” Mischler international equity trading managing director Larry Peruzzi says. “And with bond yields going higher, people are willing to take more risk and put more money into the equity side.”
The jump in yields in September is the biggest since January. The 10-year yield, which sits at 3.076%, has climbed 0.245 percentage point in the past month. The two-year treasury yield rose to 2.807%, the highest since June 2008.
Dow climbs 251 points
The Dow climbed 251.22 points, or 0.95%, to 26,656.98, a 7.8% gain for the year. The S&P 500 added 0.8% to 2930.75, a 9.6% rise this year, while the Nasdaq Composite rose 1.0% to 8028.23, to be within 1.2% of its high.
New employment data show the US economy is on its strongest footing in years. The rate of unemployment at its lowest level in nearly two decades and economic output growing at the fastest rate since 2014. Initial jobless claims, a proxy for layoffs, fell to the lowest level since 1969.
The expectation for strong profit growth is driving investors to continue buying tech stocks, a sector that includes some of the fastest-growing companies in the stock market. The sector rose 1.2% in the S&P 500.
Shares of Apple added 1.3%, extending their gain for the year to 31%. Boeing and Caterpillar, which have both seen their stock prices sag under concerns of trade tensions, added 1.1% and 1.8%, respectively.
Stocks rose in Europe but were mixed in Asia. The Stoxx Europe 600 added 0.7%. France’s CAC 40 surged 1.1%, Germany’s DAX advanced 0.9% and the UK’s FTSE 100 lifted 0.5%.
China’s Shanghai Composite eased 0.1%, Hong Kong’s Hang Seng rose 0.3% and Japan’s Nikkei 225 was largely unchanged.
Oil prices rile Trump
Chevron was one of only two Dow stocks to fall – the other was Home Depot – as oil prices declined after President Donald Trump told major oil producers in the Middle East to find a way to push oil prices lower.
US crude for October delivery was 0.2% lower at $US71.01 a barrel, capping a rally of nearly 10% over the past 30 days. Its Wednesday settlement at $US71.12, its highest since July 10.
“We protect the countries of the Middle East, they would not be safe for very long without us, and yet they continue to push for higher and higher oil prices!” Mr Trump said in a Twitter post. “We will remember. The Opec monopoly must get prices down now!”
Brent crude, the global benchmark, fell 0.5% to $US79.05 a barrel.
US dollar falls
The US dollar fell to its lowest level in more than two months. The WSJ Dollar Index, which measures the currency against a basket of 16 others, dropped 0.4% to 88.87, its lowest level since early August.
The measure is off more than 2% from last month’s highs and indicates a belief the US and China will eventually resolve their trade differences after a raft of tit-for-tat tariff increases.
“The fundamental backdrop continues to be very solid but I won’t be surprised to see more anxiousness in the market as trade continues to be an issue,” US Bank Wealth Management senior portfolio manager Eric Wiegand says. “Any headlines about dialogue between trading partners help sentiment.”
However, Citi says in a new report that a worsening trade environment represents “a material risk to growth into 2019.” The bank lowered its forecast for global growth this year to 3.3%, the first downward revision since October 2017, with the same rate expected next year.
Meanwhile, the OECD’s latest Interim Economic Outlook cites escalating trade tensions as one of three factors indicating global economic expansion appears to have peaked.
The report says tightening financial conditions in emerging markets and political risks have also reduced economic growth prospects since its May outlook. The OECD projects the global economy will grow by 3.7% in both 2018 and 2019,
