Market Snapshot: Stocks start 2017 with a rally, but records remain out of reach
U.S. stocks on Tuesday started the first trading day of 2017 on a positive note but closed off of intraday highs as oil prices turned sharply lower, puncturing some of the initial exuberance that underpinned an early rally in the Dow Jones Industrial Average.
The Dow DJIA, +0.60% rose 119.16 points, or 0.6%, to close at 19,881.76. The blue-chip index had gained as much as 176 points at one point during the session. Nike Inc.NKE, +2.26% and Verizon Communications Inc.VZ, +2.25% were among the biggest gainers while Travelers Cos. Inc. TRV, -1.24% and McDonald’s Corp. MCD, -1.73% were notable laggards.
The S&P 500 SPX, +0.85% also finished off its best levels, adding 19 points, or 0.9%, to end at 2,257.83. The index had been up as much as 25 points in early morning action. The Nasdaq Composite Index COMP, +0.85% climbed 45.97 points, or 0.9%, to close at 5,429.08.
“Stocks started with a bit of a rally as the market tried to make up for some of the losses from last week,” said Mark Kepner, managing director of sales and trading at Themis Trading.
However, the strong start out of the gate soon fizzled as oil turned weak. Crude futures CLG7, +0.54% fell more than 2% after jumping as much as 2.6% as a deal by OPEC to limit output went into effect.
The choppy action was the latest reminder of how the market has struggled in recent sessions with the Dow unable to break above 20,000, a key psychological milestone that some analysts see as a resistance level for the market.
“Once you get closer to 20,000, historically it’s been hard to get through on the first pass,” said Kepner.
Still, even though Wall Street stalled in the final sessions of 2016, with the S&P 500 dropping 1.1% in its last week of the year, it has been in a fairly pronounced uptrend since early November, when Trump won the U.S. presidential election. While financial stocks have accounted for the lion’s share of the market’s postelection gains, investors are betting that the policies Trump is expected to pursue will accelerate economic growth.
That thesis is still viewed as intact, although the size and speed of the recent rally could lead investors to take profits.
“There are people who say things are getting pricey, but corporate fundamentals are there. Even if Trump’s policies don’t come to fruition, I think the fundamentals are strong enough to keep the market rising,” said Peter Andersen, chief investment officer at Fiduciary Trust Co, who said he was “fairly optimistic” about U.S. stocks.
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In addition to Trump’s policies, investors will be monitoring the president-elect’s Twitter feed, which he has used to take shots at specific companies. On Tuesday, he criticized General Motors Co.GM, +0.89%in a tweet, writing that the company “is sending Mexican made model of Chevy Cruze to U.S. car dealers tax-free across border. Make in U.S.A. or pay big border tax!” While the stock fell in premarket trading, it subsequently turned higher, rising 0.9%.
The tweet followed similar statements against Boeing Co. BA, +0.83% and Lockheed Martin Corp. LMT, +1.35%
“Trump is making it both easy and difficult for stock pickers,” said Andersen. “We’re getting surgical precision when it comes to commentary on specific companies, but we’re still getting our sea legs with how to interpret this data. It could be more symbolic than concrete in its meaning, but we don’t know. We’re in a steep learning curve with him.”
In other company news, Xerox Corp. XRX, +19.83% jumped 20% after Credit Suisse upgraded the company to “outperform.”
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Other markets: Equities rose across the globe, with Asian markets higher after encouraging Chinese manufacturing data and European stocks building on their gains from Monday, when U.S. markets were closed for the New Year’s holiday.
A key dollar index DXY, +0.19% traded 1% higher while gold futures GCG7, -0.42% settled up 0.9%.
Economic news: In the latest economic data, the Institute for Supply Management said its manufacturing index climbed to 54.7% in December from 53.2%. The reading was higher than expected, and the highest level in two years. Separately, a read on construction spending rose 0.9% in November, above expectations and the sixth increase of the past seven months.
Check out:MarketWatch’s Economic Calendar
—Victor Reklaitis contributed to this article.