The Dow on Wednesday blasted through the 21,000 mark for the first time after US President Donald Trump’s measured tone in his first speech to Congress lifted optimism and investors viewed positively a looming interest rate hike.
The three main stock indices surged more than 1.3 percent to close at record highs, Reuters reports.
Trump on Tuesday said he wanted to boost the US economy with a “massive” tax relief and make a US$1 trillion push on infrastructure, bets that have helped Wall Street scale fresh records since the election.
But it was a break in Trump’s often-abrasive speaking style that encouraged many investors who have worried he may struggle to push his agenda through a Congress reluctant to widen the government’s budget deficit, the news agency said.
“People were concerned Trump was maybe running off the rails. After the speech last night everybody walked away with a good feeling,” said Stephen Massocca, senior vice president at Wedbush Securities in San Francisco.
“Some of the things he said, the algebra doesn’t work but people know the direction it’s going to go.”
The S&P financial index soared 2.84 percent, outperforming the other 10 major sectors, also helped by key Federal Reserve officials who hinted at an interest rate hike this month.
A March rate hike would be sooner than many investors expected and make it more expensive to borrow money to buy stocks but it would also signal policymakers’ growing confidence in economic expansion after nearly a decade of tepid growth.
“It’s not necessarily the rate increase that matters. It’s that they’re seeing things improving. If the Fed feels more confident, maybe we should too,” said Warren West, principal at Greentree Brokerage Services in Philadelphia.
Adding to expectations of stronger economic growth, the Institute for Supply Management said its manufacturing index rose in February to its highest since 2014.
The perceived chances of a March rate hike also rose after the US Commerce Department reported that January inflation ticked up by the most in four years.
Traders have now priced in a nearly 70 percent chance of a rate hike when the Fed’s policy-setting body meets on March 14-15, according to Thomson Reuters data.
The Dow Jones Industrial Average jumped 1.46 percent to end at 21,115.55, while the S&P 500 rallied 1.37 percent to 2,395.96. The Nasdaq Composite climbed 1.35 percent to 5,904.03.
Seven of the 11 major S&P sectors gained more than 1 percent, including energy, up 2.05 percent.
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