Dow snaps 7-day win streak as post-election rally eases; financials fall 1%
U.S. stocks closed mixed on Wednesday, with a post-U.S. election rally slowing down as financials dropped more than 1 percent.
The Dow Jones industrial average ended about 55 points lower, snapping a seven-day winning streak, with Goldman Sachs contributing the most losses. The S&P 500 fell around 0.15 percent, with financials leading decliners. The Nasdaq composite outperformed, rising around a third of a percent after opening lower.
"Nothing lasts forever. It's unusual to see such consistent upward trading," said Mike Bailey, director of research at FBB Capital Partners. "Investors are taking a breath to say what if these policies don't happen or don't happen as quickly as thought."
The three major U.S. stock indexes had spiked more than 2 percent entering Wednesday trading since Republican Donald Trump upset heavy-favorite Hillary Clinton to win the presidential election, lifted by the prospect of more growth-oriented economic policies from President-elect Trump, including higher infrastructure spending and deregulation of the financial sectors.
"The bounce in the stock market is a combination of optimism for faster economic growth and relief that the election is over," said Kate Warne, investment strategist at Edward Jones.
"The [stock] market is due for a correction, and we have two factors: the dollar ... and rising bond yields," said Peter Cardillo, chief market economist at First Standard Financial. "If you look at the 10-year yield, it's knocking on the door of 2.5 percent," he said. "At some point, that is going to prevent equities from going much higher."
Treasury yields, along with the U.S. dollar, have also spiked since Nov. 8. On Wednesday, however, the benchmark 10-year note yield traded near the flatline, 2.226 percent.
Edward Jones' Warne said she was surprised by the fast rise in Treasury yields, noting that it may take longer than the market thinks for Trump's policies to take effect in the economy. "It wouldn't surprise me to see [interest rates] have overshot a little," she said.
The dollar traded higher against a basket of currencies, with the euro near $1.068 and the around 109.1.
"This is becoming extremely crowded trade and there are no signs that traders want to back off at all for the time being," Naeem Aslam, chief market analyst at Think Markets, said in a note, referring to the dollar. "The strength in the dollar index does represent a risk for the emerging markets and it can also eat into corporate profit for the US firms."
Interest rates and the dollar have also received a boost from the possibility of tighter monetary policy from the Federal Reserve.
According to the CME Group's FedWatch tool, market expectations for a December rate hike were more than 90 percent. Earlier on Wednesday, St. Louis Fed President James Bullard said he would be surprised if the central bank did not raise rates next month.
In economic news, the October read on the U.S. producer price index came in unchanged, versus an expected increase of 0.3 percent. Industrial production for October was also unchanged.
Industrial production,however, "should improve as crude oil rises thanks to projected burgeoning demand as a consequence of new infrastructure spending and tax cuts for both businesses and individuals," said Jeremy Klein, chief market strategist at FBN Securities, in a note.
Meanwhile, mortgage applications fell 9 percent amid the sharp increase in interest rates. Other reports released Wednesday included the Home Builders/Wells Fargo Housing Market index, which showed sentiment held steady.
In oil markets, U.S. crude futures gyrated between gains and losses before closing 24 cents lower at $45.57 per barrel after comments from the Russian energy minister while investors digested bearish U.S. crude stockpile data.
Overseas, European equities traded mostly lower, with the pan-European Stoxx 600 index falling 0.2 percent. In Asia, stocks closed mostly higher, with the Nikkei 225 gaining 1.1 percent and the Korean Kospi advancing 0.62 percent.
Major U.S. Indexes
| TICKER | COMPANY | NAME | PRICE | CHANGE | %CHANGE |
|---|---|---|---|---|---|
| .DJI | Dow Jones Industrial Average | DJIA | 39,887.60 | +329.49 | +0.83% |
| .IXIC | NASDAQ Composite | NASDAQ | 16,742.68 | +231.50 | +1.40% |
| .SPX | S&P 500 Index | S&P 500 | 5,305.20 | +58.52 | +1.12% |
The Dow Jones industrial average fell 54.92 points, or 0.29 percent, to close at 18,868.14, with JPMorgan Chase leading decliners and Apple the top advancer.
The slipped 3.45 points, or 0.16 percent, to end at 2,176.94, with financials leading eight sectors lower and information technology the biggest riser.
The Nasdaq rose 18.96 points, or 0.36 percent, to close at 5,294.58.
Advancers were a slight step ahead of decliners at the New York Stock Exchange, with an exchange volume of 875.8 million and a composite volume of 3.757 billion at the close.
The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, traded higher, near 13.8.
Gold futures for December delivery fell 60 cents to settle at $1,223.90 per ounce.
—Reuters contributed to this report.
On tap this week:
Wednesday
Earnings: Cisco, L Brands, Tencent, NetApp
4:00 p.m. TIC data
5:30 p.m. Philadelphia Fed President Patrick Harker
Thursday
Earnings: Wal-Mart, Staples, Best Buy, Applied Materials, Intuit, JM Smuckers, Salesforce.com, Gap, Manchester United, JA Solar
8:30 a.m. Initial claims
8:30 a.m. CPI
8:30 a.m. Housing starts
8:30 a.m. Philadelphia Fed survey
10 a.m. Fed Chair Janet Yellen testifies before the Joint Economic Committee of Congress on the economy
Friday
Earnings: Foot Locker, Abercrombie and Fitch, The Buckle
5:30 a.m. St. Louis Fed President James Bullard
9:30 a.m. New York Fed President William Dudley
9:30 a.m. Kansas City Fed President Esther George
1:30 p.m. Dallas Fed President Rob Kaplan