U.S. stocks extend rally, send Dow to record amid Trump bets

The Dow Jones Industrial Average rose to an all-time high as U.S. stocks added to a rally sparked by speculation Donald Trump’s policies will benefit businesses, with banks surging to the highest level since May 2008.

The Dow rose 140.18 points, or 0.8 percent, to 18,729.87 at 10:08 a.m. in New York, taking it above its Aug. 15 record. The S&P 500 Index advanced 0.3 percent to 2,170.65, briefly climbing within 0.4 percent of a record. The broader index pared an advance that reached 0.9 percent as technology shares slumped.

Banks surged 3.4 percent, pushing the two-day advance to 8 percent, as JPMorgan Chase & Co. jumped 4.9 percent and Goldman Sachs Group Inc. climbed 2.9 percent. Drugmakers advanced, led by Pfizer Inc.’s 2.9 percent rally. Industrial shares rose 1.6 percent, with Boeing Co. adding 2.7 percent. Utilities, real estate investment trusts and consumer staples tumbled. Rising bond yields make their high relative dividend payouts less attractive.

Financial and health-care industries have paced the rally since Trump’s surprise win on Tuesday, surging on expectations that the president-elect and Republican-controlled Congress will roll back regulations and boost infrastructure spending. Trump’s promise to revive American infrastructure means commodities used to build everything from airports to bridges will benefit under his presidency, according to Goldman Sachs Group Inc.

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“It’s a relief rally over the certainty of the outcome of the election and after the conciliatory tone that Trump took,” said Nick Skiming, a fund manager at Jersey, Channel Islands-based Ashburton Ltd. His firm oversees $10 billion. “There’s hope that a new president can introduce reforms that will enable corporate America to move forward.”

Investors are betting Trump’s presidency and a Republican-controlled Congress will lower taxes, ease corporate regulation and ramp up infrastructure spending to spur economic growth. Equities recovered from early declines yesterday as he struck a more moderate tone in his first speech after the vote outcome than during his campaign. The 30-stock Dow briefly surpassed its Aug. 15 high before paring gains in the final 30 minutes.

The CBOE Volatility Index fell 3.5 percent on Thursday, set for its biggest two-day drop since June. The measure of market turbulence known as the VIX reached a four-month high on Friday. U.S. stocks had been heavily hedged as volatility surged leading up to the vote on speculation a Trump win had the potential to rattle markets as he had pledged to clamp down on international trade deals, while adopting divisive rhetoric throughout his campaign.

In the 22 elections going back to 1928, the S&P 500 has fallen 15 times the day after polls close, for an average loss of 1.8 percent. Stocks reversed course and moved higher over the next 12 months in nine of those instances, according to data compiled by Bloomberg.

With the election uncertainty out of the way, investors are also weighing prospects for the timing of the Federal Reserve’s next rate increase. Odds for a December move have increased to 82 percent from 78 percent a week ago. A report today showed jobless claims declined from an almost three-month high ahead of the election.

Among shares moving on corporate news, Perrigo Co. rose 4.5 percent after saying it will review options including the sale of rights to the royalty stream from a multiple sclerosis drug. Shake Shack Inc. stock jumped 9.6 percent in after the burger chain raised its annual sales forecast.

MetLife Inc. gained 1 percent after announcing a plan to buy back $3 billion in shares as the company prepares to spin off a capital-intensive U.S. retail business. Kohl’s Corp. rallied 6.1 percent after posting better-than-estimated earnings and boosting its stock repurchase program.

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