26 Jan 2017

Dow Jones passes 20,000 mark for the first time

8:35 am on 26 January 2017

The Dow Jones Industrial Average traded above 20,000 for the first time at the start of trading on Wednesday.

The New York Stock Exchange on Wall Street in New York

The New York Stock Exchange on Wall Street in New York. Photo: AFP

US share prices have been boosted by hopes that the economic policies of the new US President, Donald Trump, will boost his country's economy.

The index of leading US shares rallied after Mr Trump's election win and was close to breaking 20,000 on 6 January.

It fell back a bit, but rose again after Mr Trump's signing of several executive orders since his inauguration.

Shortly after opening, the Dow was up 93.38 points at 20,006.09.

The other two main US share indexes also showed gains. The S&P 500 was 10.09 points higher at 2,290.16, while the tech-heavy Nasdaq was up 36.74 points at 5,637.70.

Mr Trump's senior adviser Kellyanne Conway was quick to comment on the news, tweeting that the landmark was down to "The Trump Effect".

If the index stays above 20,000 by the time the day's trading ends, then it would mean the 42-session rise from the first close above the 19,000 mark would be the second quickest 1000 point rise of all time.

The index rose from 10,000 to 11,000 in only 24 trading days between 29 March and 3 May, 1999, while the rise from 18,000 to 19,000 took 483 trading days (nearly two years).

Financial stocks have been a major factor in the gain - with Goldman Sachs and JPMorgan accounting for around 20 percent of it.

This is because investors believe that some of Mr Trump's policies will trigger inflation and produce a rise in interest rates.

Tim Ghriskey, chief investment officer of financial management firm Solaris Group in New York, said: "There is a real belief that [Mr] Trump is real, he has been extremely active these first couple of days of the presidency and a change may happen faster than people had thought."

Neil Wilson, senior market analyst at London brokers Capital, said: "It's psychologically huge and, after a bit of pullback ahead of the inauguration, really confirms that the 'great rotation' from bonds to stocks is definitely upon us.

"Fears about protectionism are running second to optimism about inflation and growth - for now at least.

"The question now is how long can this last?

"Mr Trump's first steps as president have confirmed much of what investors had hoped for and that he's extremely pro-business and light on regulation for energy and financials. That's what's driving this renewed rally.

"The other argument claims that this is a massive bubble and if this is a real rotation from bonds into stocks, ending a 30-year bond bull market, there is still a huge amount of cash piled up that could yet pour into equities and power further gains through 2017.

"It might not be too long before 21,000 is in sight."


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