The Dow Jones Industrial Average topped 30,000 for the first time ever Tuesday, extending a stock-market rally attributed to continued progress toward a COVID-19 vaccine as well as the removal of a roadblock to a smooth transition to a Biden administration.
However trading volumes were expected to remain subdued ahead of the Thanksgiving holiday on Thursday when markets will be closed, with only half a day of trading scheduled for Friday.
On Monday, stocks finished decisively higher on vaccine news:
The crossing of the 30,000 threshold for the Dow, while underscoring the strength of the rally, has no significance in itself, analysts noted.
“In my view, it is far more interesting to compare the price of an index to the fundamental characteristics (earnings, sales, book value) of the companies within it,” said Brian Levitt, global market strategist at Invesco, in a note.
He noted that in 1999, when the Dow first hit 10,000, the average was trading at nearly 30 times earnings per share — a once-in-a-generatin high. When it next hit 10,000 in 2009, the Dow was trading at 12 times earnings, its lowest valuation in nearly 40 years.
“Today, with the Dow at 30,000, its valuation is in the middle of those two extremes ,” he said.
Upward momentum for equity markets was being attributed in part to the Trump administration clearing the way for President-elect Joe Biden’s transition to the White House.
Although investors have been preparing for a Biden presidency, the move eases worries over a bumpy transition even as Trump continues to refuse to concede the race as his efforts to overturn the results of the Nov. 3 election have met a series of legal defeats and setbacks.
“Although, the election results were not a serious threat for the market the removal of a potential chaotic political concern is cheering on investors,” wrote Peter Cardillo, chief market economist at Spartan Capital Securities LLC, in a daily note.
Analysts said investors continue to look past a surge in COVID-19 cases, and their potential near-term economic impact, as they focus on positive developments toward a vaccine and the prospect that companies whose earnings have suffered during the pandemic may revive.
“The procyclical rotation appears eager to continue today. Perhaps what is somewhat settling to investors is the fact that Tech/growth/momentum is managing to hold up relatively well,” said Yousef Abbasi, global market strategist at StoneX, in a note.
Meanwhile, markets drew some optimism from reports late Monday that former Federal Reserve Chairwoman Janet Yellen is Biden’s pick for Treasury secretary.
Yellen is considered an experienced economist and administrator who helped the markets and the economy navigate the recovery from the 2008 financial crisis. She would be the first woman to serve as U.S. Treasury secretary.
Some analysts see the selection of Yellen as raising the likelihood of further fiscal measures to support the economic recovery from the COVID-19 pandemic.
Gains for markets on Monday were mostly fueled by fresh reports on progress toward a vaccine, with the University of Oxford and AstraZeneca saying their coronavirus vaccine candidate was found to have as much as a 90% efficacy rate in preventing infections without serious side effects in a late-stage trial.
News of COVID-19 vaccines has buttressed optimism on Wall Street at a time when coronavirus cases are rising in 45 U.S. states. The global tally for confirmed coronavirus cases climbed to 59.3 million on Tuesday, according to data aggregated by Johns Hopkins University, while the death toll rose to 1.39 million. The U.S. has the highest case tally in the world at 12.4 million and the highest death toll at 257,707, or more than a fifth of the global total.
The U.S. Case-Shiller House Price Index rose at a 6.6% annual pace in September.
Stocks extended gains, despite a fall in the Conference Board’s consumer-confidence index from 101.4 to 96.1, a three-month low after a record wave of coronavirus cases spurred some cities and states to reimpose restrictions and Americans took greater precautions.
New York Fed President John Williams is set to speak at noon Eastern, and Fed Vice Chairman Richard Clarida is slated to speak at 12:45 p.m.