By Riva Gold
Markets stabilized Wednesday ahead of the Thanksgiving holiday after the Dow Jones Industrial Average closed above 19000 for the first time in history.
The Dow Jones Industrial Average swung between small gains and losses and was recently up 3 points, or less than 0.1%, at 19027. The S&P 500 fell 0.3% and the Nasdaq Composite lost 0.5%.
The moves come after the blue chip index, S&P 500, Nasdaq and Russell 2000 all closed at record highs on Tuesday for a second day in a row, spurred by a recent uptick in corporate earnings, a jump in oil prices and hopes that the election of Donald Trump would lead to higher growth and inflation.
Many expect the gains to hold in the coming weeks."This is relief," said Shannon Saccocia, head of asset allocation at Boston Private Wealth. "We have positive earnings posted, an energy market which has stabilized, and we'll have fiscal spending that will benefit parts of the market that have lagged," she said.
In currencies, the WSJ Dollar Index gained 0.7% after rising for 11 of the past 12 sessions as expectations have grown for higher inflation and higher U.S. interest rates.
Later Wednesday, the Federal Reserve will release minutes from its November meeting, when it decided to keep rates on hold. Given the shift in financial markets since then, "I can't imagine what they would've said in that pre-election meeting that would be at all relevant at this point," Ms. Saccocia said.
"Comments out of the December meeting will be more interesting," she added.
The course of interest rates in 2017 will be crucial for the performance of the bond market as well as stocks in the coming years, investors say.
While the overall moves in the S&P 500 have been small, "there's a big change in market leadership," said Christophe Foliot, head of U.S. and international equities at Edmond de Rothschild Asset Management.
After a rough start to the year, the S&P 500 financials sector has risen over 13% in the past month, while the industrial sector has added over 8%. Shares of utilities companies have fallen nearly 3% after an earlier outperformance.
Mr. Foliot is favoring more domestically oriented U.S. stocks in his portfolios, which he says are likely to benefit more from tax cuts and a growing U.S. economy. They are also less likely to suffer than multinationals if the dollar continues to strengthen or if Mr. Trump enacts protectionist policies, he said.
"The pace of appreciation of the U.S. dollar over the last two weeks has been pretty quick and pretty sharp," he added.
The Stoxx Europe600 fell 0.5%. The British pound fell 0.4% against the dollar to $1.2375 as investors analyzed the U.K.'s Autumn Statement, revealing the government's tax and spending plans after the June referendum on European Union membership.
U.K. Treasury chief Philip Hammond said he would aim to close the budget deficit as soon as possible, but not by 2020, and set out plans for infrastructure spending to support the economy. Yields on 10-year U.K. bonds were higher at 1.463%.
The U.K. economy will grow more slowly over the next few years than was forecast before the referendum, Mr. Hammond said.
Elsewhere in European stocks, commodity-sensitive companies, such as miners and oil giants, continued to advance, but the gains were offset by declines in banks and insurance companies.
Italian banks were among the worst performers ahead of a coming referendum on constitutional reform, with shares of UniCredit down 3% and Banco Popolare diMilano off 3.8%.
For European equities to pick up, "you need foreign investors coming back to Europe and more clarity on political issues, which can't happen before Dec. 4," said Mr. Foliot, referring to the date of the referendum.
It's not the only source of political risk for European assets. The yield on 10-year French government bonds rose to 0.802% on Wednesday, as investors grow concerned over the country's presidential election in roughly five months.
In other government bond markets, the yield on 10-year German government debt rose to 0.271% from 0.229% on Tuesday, while the yield on the 10-year U.S. Treasury note rose to 2.381%, according to Tradeweb, from 2.319% on Tuesday.
Earlier, stocks in Australia and South Korea followed Wall Street higher, while markets in Hong Kong and Shanghai struggled for traction after three days of gains. Markets in Japan were closed for a holiday.
Investors also continued tokeep an eye on the price of oil ahead of a meeting of the Organization of the Petroleum Exporting Countries next week. U.S. crude fell 0.6% to $47.74 a barrel, after hitting its highest settle level in nearly a month on hopes for an agreement to cap production.
Write to Riva Gold at email@example.com
(END) Dow Jones Newswires
November 23, 2016 10:12 ET (15:12 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.