The Dow Jones Industrial Average closed above 33000 for the first time Wednesday after the Federal Reserve pledged to maintain its easy-money policies as the U.S. economy recovers from the damage of the Covid-19 pandemic.
The record comes just five trading days after the blue-chip average first closed above than 32000—its quickest 1,000-point milestone on record, according to Dow Jones Market Data. The S&P 500 also ended at a record.
Investors are wary of any sign the monetary stimulus that has supported markets during the pandemic could begin to subside, and all three major stock indexes turned higher at the afternoon release of the central bank’s statement. They rose further as Fed Chairman Jerome Powell spoke to reporters.
“At the Fed, we will continue to provide the economy the support that it needs for as long as it takes,” Mr. Powell said.
The Dow industrials climbed 189.42 points, or 0.6%, to 33015.37, the 15th record close of 2021. The S&P 500 rose 11.41 points, or 0.3%, to 3974.12, its 14th record of the year.
The tech-heavy Nasdaq Composite added 53.64 points, or 0.4%, to 13525.20. Recent weakness in tech shares has left the Nasdaq off 4% from its February record.
With unemployment still elevated, Fed officials are taking a cautious approach, said George Catrambone, head of Americas trading at asset manager DWS Group.
“Investors are taking some solace in that,” he said. “We’re going to make sure it’s there, that the recovery is sustainable and inflation is sustainable, before we really think about raising rates.”
The Fed also highlighted the brightening outlook for economic growth. Investors in recent weeks have trimmed bets on the technology stocks that soared earlier in the pandemic while adding shares of economically sensitive companies that should do well as the vaccine rollout progresses and more fiscal stimulus enters the financial system.
The tech sector of the S&P 500 edged lower Wednesday, while cyclical groups such as industrials, materials, energy and financials posted gains. For the year, the energy and financial sectors are leading the index, while shares of former highfliers Apple and Amazon.com are down 6% and 3.7%, respectively.
“Tech is the funding source for reallocation,” said Jamie Cox, managing partner for Harris Financial Group. “You’re restoring the allocations that you had pre-pandemic.”
Money managers have started pricing in a rise in inflation, leading to a selloff in government bonds, and are betting that interest rates will start climbing by the end of next year. That has led to a reconsideration of stocks that look pricey after last year’s rally.
“Markets across the board are expensive today, and that is pinned on central bank support,” said Hugh Gimber, a strategist at J.P. Morgan Asset Management. “So this whole market is very, very sensitive to changes in central bank policy.”
Value stocks—which trade at low multiples of their book value or net worth—continued their recent outperformance over shares of rapidly growing companies that often have higher price tags. The Russell 1000 Growth Index inched up 0.1% on the day, trailing a 0.5% gain by the Russell 1000 Value Index. The value gauge is up 11% for the year, compared with a 1% rise by the growth index.
“The resurgence of value investing has been the big story of the year,” said Mace McCain, chief investment officer at Frost Investment Advisors, noting that the rollout of coronavirus vaccines should help the economic recovery. “We expect tremendous growth this next year.”
In bond markets, the yield on the benchmark 10-year U.S. Treasury note rose to 1.641%, from 1.622% Tuesday. Yields rise as the price falls. The yield has climbed sharply from this year’s low of 0.915% on Jan. 4.
Among individual stocks, NRG Energy fell $7.26, or 17%, to $36.18. The company said it is withdrawing its 2021 financial guidance after the recent winter storm hit its results. Shares of Plug Power dropped $3.35, or 7.8%, to $39.33 after the hydrogen and fuel-cell technology company said it would restate financial statements.
Brent crude, the international benchmark for oil, fell 0.6% to $68.00 a barrel.
In overseas markets, the Stoxx Europe 600 edged 0.4% lower. Most major indexes in Asia were little changed. South Korea’s Kospi index fell 0.6%, while the Shanghai Composite, Hang Seng and Nikkei 225 indexes all ended the day nearly flat.
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