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article imageOp-Ed: Stellar start for 2018 for three main U.S. stock indices

By Ken Hanly     Jan 6, 2018 in Business
New York - The three main stock market indices in the US, the Dow Jones Industrial Average (DJIA), the S & P 500 Index (SPI) and the Nasdaq Composite Index (COMP) all closed the first week of trading in 2018 on a positive note and at record levels.
2017 performance
In 2017 the Dow (DJI) gained 25.1 percent. The S & P 500(SPI) rose 19.4 percent, while the Nasdag composite(COMP) rose even more at 28.2 percent.
January 2
Both the Nasdaq and the S & P 500 posted intraday highs as well as closing at new highs.
The S & P 500 rose 0.8 per cent, closing at 2,695.79 a closing record. Several areas rose including consumer discretionary; energy, and tech stocks, all rising more than one percent.
The Nasdaq composite advanced even more, 1.5 percent to close at 7,006.90. This is the first time the Nasdaq has ever closed over 7,000.
The Dow Jones Industrial average (DJIA) also rose 104.79 points to close at 24,824.01. Disney shares were among the better performers, rising four percent.
Peter Cardillo, of First Standard Financial said: "This is basically an extension of what we saw in 2017. With economic data being strong, investors are betting that economic growth will translate into strong earnings growth."
Trump's pro-business policies are no doubt in part responsible for the positive outlook. Trump's tax bill decreases the corporate tax rate from 35 percent to 21 percent. This will increase corporate profits. Although the tax cut mainly benefits corporations Trump tweeted: "Companies are giving big bonuses to their workers because of the Tax Cut Bill. Really great!"
While some companies will give bonuses to their workers as a result of the tax cut, the main benefit from the cuts goes to corporations with any tax cuts for the middle class being temporary as contrasted with those given to corporations. Trump's tweet is designed for his populist base.
The tax cuts will also result in huge deficit increases that will probably result in drastic cuts to social programs.
A good first day of trading in the New Year a positive sign
Ryan Detrick, senior market strategist at LPL Financial claims that over the past 20 years when the S & P 500 ends the first day of the year higher, the average rise in return over the full year is 14.2 percent.
Over that time the S & P 500 has been lower ten times and higher ten times. The average for the ten down times is -0.6 percent.
Friday's close and the week's performance
The Wall Street Journal noted that the Dow Jones Industrial Average(DJIA) had its best start for the year since 2003. Signs of a solid economic background led to new highs for stocks during the first week of January the paper claimed.
The close on Friday saw the Dow Jones Industrial Average (DJIA) rise 220.74 points to 25,298.87. This was a rise of 0.9 percent.
The S & P 500 (SPX) rose a little less at 0.70 percent. It closed up 19.16 points to 2,743.15.
Finally, the Nasdaq composite (COMP) was also up, gaining 58.64 points to 7,136.56. This was a gain of 0.8 percent.
In every day this week, none of the three indices have had a single down day. Both the S& P 500 and the Nasdaq had four straight days of records at the close. The Dow (DJIA) had a third in a row on Friday
Over the week the Dow (DJIA) rose 2.3 percent. The S & P 500 gained 2.8 percent, while the Nasdaq rose most of all at 3.4 percent.
The Dow managed its biggest gain for a week since the week ending Dec. 1 last year. The S & P 500 had its best showing since the week ending Nov. 11 2016. The Nasdaq had its best showing since the week ending Dec. 9, 2016.
Causes of the gains
One main factor has been the recently passed tax package. However, rising commodity prices, and good corporate earnings also played a role, as did solid economic data. However, job creation was the lowest in three months. The unemployment rate is still low though at 4.1 percent, a rate that has lasted through three months.
December US factory orders rose by 1.3 percent in November a rate faster than expected the fourth straight month of increases.
Lower jobs number was actually positive for the market
Mark Luschini, chief investment strategist at Janey Montgomery Scott said: “The jobs number is a market-friendly number, in that it is good but not overheated. Investors should interpret this as Fed-friendly, in that the central bank will remain interested in the economy but not get overly aggressive in raising rates in 2018. While it came in below expectations, it wasn’t sufficiently weak for investors to feel they should sell. Single months of data can be lumpy, but the average over the past few months shows that the labor market remains strong.”
Trump will no doubt claim responsibility for stock indices' record highs.
Once Trump calms down sufficiently from his reaction to the new book on him by Micahel Wolf, he no doubt will find time to boast that he is responsible for the record gains in stock indices.
The business and investor community must judge Trump's policies as sufficiently pro-business to more or less ignore, for the most part, the extent to which Trump is creating division inside the country and conflict with a number of allies. However,if the political situation comes to threaten business and economic growth, it may be that Trump will be dumped while many of his policies will remain in place.
No doubt Trump would ask: "Why would the business community want to get rid of a stable genius such as myself?" One reason could be that the genius pulls out of NAFTA.
This opinion article was written by an independent writer. The opinions and views expressed herein are those of the author and are not necessarily intended to reflect those of DigitalJournal.com
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