Dow posts best week since 2011 after Donald Trump election win

U.S. equities closed mostly higher on Friday, with the three major indexes posting their best weekly gains of the year on the back of a surprise Republican sweep.

"I think you're seeing a transition from a government that had its thumb on growth to a free economy," said Bruce Bittles, chief investment strategist at Baird. "We're now looking at an economy that can reach its full potential."

The Dow Jones industrial average closed about 37 points higher, with Goldman Sachs contributing the most gains. For the week, the Dow rose around 5.4 percent, marking its best weekly performance since December 2011.

"The Republican sweep across Washington should pave the way for tax reform at both the individual and corporate level. America's largest multinational companies will almost assuredly have the opportunity to repatriate some of its foreign cash holdings for a modest penalty," said Jeremy Klein, chief market strategist at FBN Securities.

The S&P 500 underperformed, falling 0.15 percent, with energy falling 1.68 percent to lead decliners. The index, however, ended the week about 3.8 percent higher, posting its highest weekly gain since 2013.

Energy stocks were pressured by falling oil prices, as U.S. crude fell 2.8 percent to settle at $43.41 per barrel after OPEC said October output reached another record, casting doubt on whether its plan to limit production is achievable or enough to ease persisting oversupply in the market.

The Nasdaq composite rose more than half a percent and gained 3.8 percent for the week, marking its best weekly performance since February.

"Within a week, the market went from egregiously oversold to overbought. They managed to repair all the damage done during the nine-day losing streak," said Adam Sarhan, CEO of 50 Park Investments.

Stocks skyrocketed after Republican Donald Trump's surprise victory over Hillary Clinton, as investors considered the prospects of higher infrastructure spending and less regulation within the financial sector. The Dow closed at an all-time high on Thursday, while the S&P and the Nasdaq were flirting with their record highs entering Friday. Financial markets, as well as numerous pollsters and political analysts, had expected Clinton, the former secretary of State, to win the race for the White House.

"The market is giving Trump the bullish benefit of the doubt," Sarhan said. But "if he starts going off the deep end, whether on foreign policy or something else, then that could be bad for the market."

Traders work on the floor of the New York Stock Exchange.
Getty Images
Traders work on the floor of the New York Stock Exchange.

Since Trump's victory, investors have been quickly reallocating assets, increasing exposure to financials and industrials, while lowering positions in sectors like utilities, real estate and consumer staples.

As of Friday's close, financials and industrials had gained 11.33 percent and 7.96 percent, respectively, while utilities, consumer staples and real estate were down 4.08 percent, 2.13 percent and 1.47 percent, respectively.

"Now that we've had a chance to consider it, ... I think people will see considerable economic growth and people will forget about" the election, said Maris Ogg, president at Tower Bridge Advisors. "What I worry about is the Republicans getting too cocky and try to ram through stuff without the Democrats. If they're smart, they'll try to do it in a bipartisan way."

Sharp moves were also seen in the U.S. Treasury market following Trump's win, with the benchmark 10-year yield breaking above 2 percent. The U.S. bond market was closed on Friday due to Veterans Day.

The dollar, meanwhile, surged against a number of Emerging Market currencies, especially the Mexican peso. Since Tuesday, the peso has fallen 11.53 percent against the U.S. currency, according to FactSet. The Brazilian real, another closely watched EM currency, has dropped about 6.86 percent. EM currencies in Asia weren't spared, either, with the Malaysian ringgit and the Chinese yuan also falling.

"While the declines seen in Asian currencies are being linked to the impact of trade throughout the continent if Donald Trump enforces protectionist trade policies, the return of expectations that the Federal Reserve will still raise US interest rates in December is strengthening the Dollar and also pressuring the emerging market currencies," Jameel Ahmad, vice president of market research at FXTM, said in a note.

"If the Federal Reserve do not raise US interest rates in December as they have been preparing the markets towards for months following such a spectacular rebound in stocks after the victory by Trump, it will raise questions over credibility and concerns that they are worried about Donald Trump taking over office in January," he said.

The Fed is largely expected to raise rates next month, according to the CME Group's FedWatch tool, which said market expectations for higher rates were around 76 percent.

Before the bell, Fed Vice Chairman Stanley Fischer said the case for removing accommodation is "quite strong" while interest rates will plateau at a level that is lower than normal. He added that He expects U.S. rates to rise gradually, and said the Fed is close to achieving its dual mandate. The Fed's goal is to return to 2 percent longer-run inflation and to maximize employment.

In economic news, consumer sentiment for November came in at its highest level since June.

Overseas, European equities traded slightly lower, with the pan-European Stoxx 600 index slipping 0.41 percent. In Asia, stocks closed mostly lower, with the Nikkei 225 gaining 0.18 percent and the Korean Kospi falling 0.91 percent.

Symbol
Name
Price
 
Change
%Change
DJIA
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S&P 500
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NASDAQ
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The Dow Jones industrial average rose 39.78 points, or 0.21 percent, to close at 18,847.66, with Walt Disney leading advancers and Pfizer the top decliner

The S&P 500 fell 3.03 points, or 0.14 percent, to 2,164.45, with energy leading six sectors lower and consumer discretionary the biggest riser.

The Nasdaq composite gained 28.32 points, or 0.54 percent, to 5,237.11.

Advancers were a step ahead of decliners at the New York Stock Exchange, with an exchange volume of 1.147 billion and a composite volume of 4.881 billion at the close.

High-frequency trading accounted for 52 percent of November's daily trading volume of about 8.75 billion shares, according to TABB Group. During the peak levels of high-frequency trading in 2009, about 61 percent of 9.8 billion of average daily shares traded were executed by high-frequency traders.

Gold futures for December delivery fell $42.10 to settle at $1,224.30 per ounce.

—CNBC's Katie Little and Reuters contributed to this report.