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Traders work on the floor of the New York Stock Exchange on Nov. 7, 2022.
Brendan Mcdermid | Reuters
A broad stock rally pushed the Dow Jones Industrial Average, S&P 500 and small-cap focused Russell 2000 index to new records on Monday. Investors bet President-elect Donald Trump’s choice for Treasury secretary, Scott Bessent, would help guide the economy without sparking inflation.
The blue-chip Dow traded 415 points, or 0.9%, higher, while the broad S&P 500 gained 0.3%. Both hit new all-time highs in the session. The Nasdaq Composite also ticked up 0.3%.
Monday brought a broad advance as investors cheered Trump’s decision to nominate Scott, the founder of Key Square Group. The Russell 2000 jumped 2% to surpass a prior all-time high set in 2021. Around 4 out of 5 S&P 500 stocks traded higher in the session.
Investors see the hedge fund manager as someone who will be supportive of the equity market. They believe he may also help mitigate some of Trump’s most extreme protectionist policies, such as his stance on taxing imports.
“I would recommend that tariffs be layered in gradually,” Bessent said to CNBC in an interview earlier this month before he was picked. “If you take that price adjustment coupled with all the other disinflationary things President Trump is talking about, we’re going to be at or below the 2% inflation target again.”
The Russell 2000
Treasury yields and the U.S. dollar index pulled back following the Bessent pick late Friday. Indeed, the 10-year Treasury yield dropped more than 14 basis points in Monday’s session. These moves, paired with Monday’s equity market gains, show a “textbook” positive reaction to Trump’s decision, according to Quincy Krosby, chief global strategist at LPL Financial.
“You can’t ask for a better reception from the market,” Krosby said. “This is the market applauding.”
Big technology, on the other hand, was more mixed. While Amazon and Alphabet took legs up, Nvidia and Netflix dropped.
Monday’s action adds to the narrative that last week’s gains have restarted the postelection rally. After surging in the wake of the presidential race’s conclusion, the ascent had taken a breather as worries about rising yields and the potential for inflation from Trump’s policies took hold.
U.S. markets are dark Thursday due to the Thanksgiving holiday and close early on Friday, so trading volume is likely to be light this week. During the shortened trading week, the interest rate outlook is likely to be a focus.
Investors will monitor the release of October’s personal consumption expenditure price index, the Federal Reserve’s preferred inflation measure, on Wednesday. Minutes from the Fed’s most recent policy meeting are also due out ahead of Thanksgiving.
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