By Akane Otani and Riva Gold
The Dow Jones Industrial Average rose for the sixth day in seven and U.S. Treasury yields touched their highest level since July 2015, concluding a month viewed by many traders as the most eventful in financial markets since the euro crisis ended in 2012.
The Dow rose 1.98 points to 19123. The 30-stock average rose 5.4% for the month, its best performance since March. It set eight records in November and crossed 19000 for the first time Nov. 22, highlightinga furious U.S. stock rally that began the day after the surprise election Nov. 8 of Donald Trump as president.
Many analysts and investors expect November's popular trade, buying stocks and selling bonds, to remain in vogue for the balance of the year. They cite generally upbeat domestic economic reports, increasingly sanguine signs from overseas and expectations that the U.S. economy will continue its gradual expansion.
"There's still a runway for upside given you still have a lot of positive things going on," said Lowell Yura, portfolio manager at BMO Global Asset Management. "You have home prices increasing, consumer net worth increasing dramatically, low unemployment and signs of wage growth."
Since Election Day, investors have snapped up shares of banks, industrials and small companies, while selling bonds and dividend-paying shares in a bet that Mr. Trump's administration will loosen regulation and boost fiscal spending,a combination that the market is betting will lead to higher U.S. growth and inflation.
On Wednesday, energy companies led gains in stocks as U.S. crude oil rocketed 9.3% to $49.44 a barrel -- its largest one-day percentage gain since February -- after OPEC representatives reached a deal to cut oil production. The S&P 500 energy sector jumped 4.8% on Wednesday, capping off November with its biggest monthly gain since April. For the month, U.S. crude oil ended up 5.5%.
Bond prices declined. The yield on the benchmark 10-year Treasury note settled Wednesday at 2.365%, its highest closing level since July 2015. That was up from 2.305% Tuesday and 1.834% at the end of October, marking largest one-month increase for the yield since December 2009. Yields rise when bond prices fall.
The buy stocks, sell bonds trade picked up steam as the month wore on, reflecting in part a string of economic reports showing the housing market improving, consumer prices picking up and jobless claims falling.
Bets on this "reflation trade" drove a surge in financial and industrial shares. Goldman Sachs Group, UnitedHealth Group and Caterpillar were the top performers in percentage terms as of Wednesday's close.
The Dow Jones Transportation Average, often seen as a proxy for economic health because it includes companies that move goods powering manufacturing and construction, climbed 11% in November -- its biggest monthly gain since October 2011. The Russell 2000 of small-caps had its best month since September 2010.
November's bond losses sent yields approaching 2.5% for the first time this year, a sign that some investors view as evidence that the lower-for-longer theme in vogue earlier in 2016 has lost credence in the market.
Skeptics point out that uncertainty remains around Mr. Trump's administration and policy stances, and caution that the market's rally may be premature. Multiples remain extended by historical standards and uncertainty is rife over what parts of Mr. Trump's platform will pass muster with Congress.
"We don't have these policies in place yet -- it's more of a gambler's market," said Bret Chesney, senior portfolio manager at Alpine Global.
And some, who view the market's rapid climb over the past few weeks as having been driven mostly by a pickup in investor sentiment, say weak spots like flagging business investment and soft global growth could derail the rally.
"The market's had a nice run, but it's also in the process of running out of steam," said Wouter Sturkenboom, senior investment strategist at Russell Investments.
The S&P 500 slipped 5.85 points, or 0.3%, to 2198.81 and ended the month with a 3.4% gain. The Nasdaq Composite fell 56.24 points, or 1%, to 5323.68 and added 2.6% for the month.
Bonds have been under selling pressure lately, amid solid U.S.economic data -- including Tuesday's Commerce Department report that showed gross domestic product had its strongest growth in two years in the third quarter -- and expectations that the Federal Reserve will soon raise interest rates.
Those expectations have lifted the dollar, which was recently up 1.7% against the yen. The WSJ Dollar Index, which measures the currency against 16 others, rose 0.7% Wednesday. Higher rates make the currency more attractive to yield-seeking investors.
Elsewhere, the Stoxx Europe 600 rose 0.3% for the day and 0.9% for the month, lagging behind its developed-market peers amid continuing jitters about the political climate.
Japan's Nikkei Stock Average was flat but ended the month over 5% higher than it started, bolstered by a steady strengthening of the dollar against the yen.
Write to Akane Otani at firstname.lastname@example.org and Riva Gold at email@example.com
(END) Dow Jones Newswires
November 30, 2016 17:18 ET (22:18 GMT)
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