Press. voanews.com
U.S.
stocks closed out Friday's session at the highs of the day following a historic
week in trade, with the Dow Jones industrial average closing at a record high,
up 5 percent on the back of Donald Trump's stunning upset victory in the
presidential election and the Republican Party's control of both houses of Congress.
This was
the best performance for the Dow in five years and the best week for the
S&P 500 since October 2004. Despite the market's overall performance, crude
oil prices dipped by 3 percent, with traders focusing on supply and demand
fundamentals, which continue to be stretched. The Organization of Petroleum
Exporting Countries reported an increase in October production to a record
high. This was led by members hoping to be exempt from any OPEC attempts to
curb supply at the group's next meeting in Vienna on November 30. Based on the
continuing high level of production, which has kept prices down, a larger
global surplus is expected next year.
Trump
rally
The
S&P 500 index came into this week riding a nine-session losing streak, its
longest since 1980, while the VIX, which measures fear and uncertainty in the
market, had been up for nine straight sessions as of last Friday. That all
changed once traders absorbed the election news. In the first hours after the
polls closed Tuesday night, overnight futures prices fell precipitously, but by
Wednesday morning's opening, trading was back on the upside.
Among the
week's highlights: the Dow soared more than 250 points Thursday to an all-time
closing record. The previous week's losing streak turned around completely,
with an upward spike of nearly 1,000 points in four days. That was the best
four-day point gain since an 1,174-point climb in late November 2008.
"Within
a week, the market went from egregiously oversold to overbought," said
Adam Sarhan, CEO of 50 Park Investments. "Market participants [this week]
managed to repair all the damage done during the nine-day losing streak." Contrary
to earlier predictions of a a significant pullback following Trump's election,
Brad McMillan, chief investment officer for Commonwealth Financial Network,
listed three reasons why the markets spiked:
1. The
nine-day pullback before the election certainly was pricing in some probability
of a Trump win. When he actually won, the uncertainty risk disappeared. That
alone could have driven markets back up.
2. A
Republican sweep may have been perceived as positive for business and the
economy.
3.
Markets tend to sell the rumor and buy the news, and this could have been just
a normal reaction.
Will
euphoria continue?
There
will be pockets of volatility as the markets digest Trump's domestic and
foreign policy initiatives, the Fed, interest rate cycles, inflation growth,
and the natural ebbs and flows of the economic cycle.
Although
early market strength after an election is unusual, and certainly caught many
insiders off guard, analysts at LPL Financial said there was no sign that it
meant much in the longer term, either positive or negative. Those seeking
longer-term returns should continue to focus on valuations and fundamentals,
the analysts said.
At the
end of the day, corporate America is adaptable. Over the past 80 years, many
disruptive policies have come and gone — as have recessions, periods of high
inflation, interest rate spikes, Federal Reserve rate-hike cycles, wars and
terrorist attacks. Through it all, S&P 500 companies have grown profits by
an average of 8 percent annually.
Trading
week ahead
Trump's
transition and policy initiatives will continue to dominate headlines, but
attention will also swing back to the Federal Reserve, which could raise
interest rates on December 14. Chair Janet Yellen is set to appear before the
Joint Economic Committee on November 17, and more than a dozen other Fed
officials are due to speak during the coming week.
Data on
inflation, housing, manufacturing and consumer spending will also draw plenty
of attention. Earnings from consumer-related companies will set the tone for
the key holiday sales season. The National Retail Federation expects retail
sales in the U.S. for November and December (excluding autos, gas and
restaurants) to increase a solid 3.6 percent to $655.8 billion, significantly
higher than the 10-year average of 2.5 percent and above the seven-year average
of 3.4 percent since the recovery began in 2009.
Key
companies set to report include: Dick's Sporting Goods, Home Depot, TJX Stores,
Lowe's, Target, Limited Brands, Best Buy, J.M. Smucker, Wal-Mart, The Gap, and
Abercrombie & Fitch.