Investing.com - The Dow Jones Industrial Average managed to reach 20,000 points for the first time ever on Wednesday, in a 1,000 point run between triple-zero psychological levels that took 2 months and 3 calendar days.
Point levels ending in three zeros tend to be highly focused on by both investors and the media, though they can lack importance from the point of view of technical analysis.
The blue-chip index breached 19,000 points on November 22, 2016 in a run from 18,000 points hit on December 23, 2014, or exactly one year, 10 months and 30 days later.
The Dow has now risen roughly 5.3% since crossing 19,000 points, but is up approximately 211% since the March 9, 2009 bear market low at 6,440.08 points.
In terms of calendar days, the race from 19,000 to 20,000 takes second place in the list of fastest moves between triple-zero milestones.
The run during the 1999 tech bubble from 10,000 to 11,000 points remains in first place, having taken just one month and four calendar days, while the move from 13,000 to 14,000 in 2007 falls back into third place with a race that lasted two months and 24 days.
“Trump-rally” or earnings growth?
Wall Street began to rally when Donald Trump surprised markets with an unexpected victory in the U.S. presidential elections. Market players speculated that fiscal policies implemented by the incoming President-elect, including infrastructure spending and tax cuts, would spur economic growth, driving company profits and resulting in what many analysts refer to as the “Trump-rally”.
Indeed, the Dow has risen approximately 9.1% since the November 8 election day close of 18,332.74 points, despite the fact the Federal Reserve (Fed) hiked interest rates on December 14 for the only the second time since and upped its expectations for the number of increases in 2017 to three, from the prior two.
Trump took credit for the rally on December 26, saying via his Twitter account that “the world was gloomy before I won – there was no hope.”
However, some analysts have argued that the rally had little to do with Trump’s victory, instead focusing on growth in company earnings.
UBS cross-asset strategist Maximilian Kunkel pointed out that third-quarter earnings growth was 4%, beating market expectations for a 1% year-on-year decline.
“That was the first time since the middle of 2015 that earnings were actually accelerating,” he told CNBC in an interview last month, adding that earnings growth is going to accelerate into 2017.
“That’s really what is driving the markets,” Kunkel concluded.
Analysts expect fourth-quarter earnings will show an increase of 6.1% from a year ago. The S&P financial sector earnings are expected to have the biggest gains, with earnings up 15.7%.
As of Tuesday, 88 S&P 500 companies had reported fourth quarter earnings with 70% beating consensus on profit growth of 8.9% while 56% topped expectations on sales growth of 2.6%, according to earnings trend analysis firm The Earnings Scout.
In any case, January had seen U.S. stocks take a pause, with the S&P 500 registering closing moves of less than 1% every session so far this year. In fact, the biggest move was a 0.85% gain on January 3, the first trading day of 2017.
If the S&P fails to trade with a 1% move at the close again on Wednesday, that will mark 27 consecutive days or its longest such streak in 22 years, according to LPL Financial market strategist Ryan Detrick.
Experts had widely commented this month that investors were on hold as they waited to see what fiscal policies Trump would ultimately decide to implement.
Tuesday had seen buying return to the trading floor as the President signed executive orders to facilitate the permit process by decreasing the regulatory burden on domestic manufacturers and gave the go ahead to restart the Keystone XL and Dakota Access pipelines.
In any case, the future direction of U.S. stocks is most likely to be based on a combination of both Trump’s actions and their effect on company balance sheets. Whatever further fiscal policies the new administration decides to propose and push through Congress will undoubtedly benefit some firms while the bottom line of others could take a hit depending on the measures taken and the sectors involved.
At 9:34AM ET (14:34GMT), the Dow was up 0.51% at 20,015.59, just off an intraday all-time high of 20,033.77.