Dow races to 25,000 for the first time

This stock market doesn't obey speed limits. It just blasted through another barrier: Dow 25,000.The market mi...

Posted: Jan 4, 2018 3:23 PM
Updated: Jan 4, 2018 3:23 PM

This stock market doesn't obey speed limits. It just blasted through another barrier: Dow 25,000.

The market milestone comes barely a month after the Dow cracked 24,000 for the first time. The 121-year-old index has spiked nearly 7,000 points, or 36%, since President Trump's election, an incredible move in such a short period.

The breathtaking pace of the market's rise shows how excited Wall Street is. Corporate profits are gigantic, American economic growth is accelerating, and Trump just enacted a massive business tax cut that could strengthen both, whether they're needed or not.

"We have been moving up extremely fast," said Howard Silverblatt, senior index analyst at S&P Dow Jones Indices, which owns the 30-stock Dow. "It's amazing and begs the question: How high can this thing go?"

Consider that it took the Dow 14 years to climb from 10,000 to 15,000 and three and a half years to reach 20,000. The ride from 20,000 to 25,000? Not even 12 months. Don't blink or you'll miss another landmark.

The stock market has risen this rapidly without taking any real breathers, but there are good reasons.

The U.S. economy is very healthy, especially compared with the slow recovery from the Great Recession. Unemployment hasn't been this low in 17 years. Economic growth is the best in three years. Equally important, most major world economies are growing at the same time for the first time in several years.

Related: Can the stock market bull keep raging in 2018?

Thanks to those economic gains, corporate profits have never been higher. Companies are sitting on record amounts of cash, a chunk of which is being returned to shareholders. That makes stocks more attractive.

"Unlike the bull market that ended in 2000, this one has earnings behind it," said Silverblatt, alluding to the dotcom bubble that was built on illusory profits at Pets.com and the like. "The fundamentals are good. The economy is strong."

That's a big reason why the Dow soared 25% last year, its best performance since 2013. The Dow's post-election boom has been led by enormous gains from Boeing, Caterpillar and Apple. All three are thriving because of the economic momentum at home and abroad.

The stock market also owes Janet Yellen some thanks. Under Yellen, the Federal Reserve has kept interest rates extremely low to allow the economy to heal. Low rates have forced investors to take risks by betting on stocks. They've also kept borrowing costs unbelievably low. Although Yellen is leaving, her replacement, Jerome Powell, has promised to raise rates at just a gradual pace.

Trump has frequently cheered the stock market to go higher, and his push for tax cuts has helped make it happen. Analysts say the past few months of gains have been driven in part by increasing signs that tax cuts will become a reality.

Wall Street loves the Republican tax overhaul because it will save companies on what they owe Uncle Sam. The law lowers the corporate tax rate from 35% to 21%. It would also encourage companies to bring overseas profits back home.

Companies are likely to use a big chunk of their tax savings to reward shareholders with fatter dividends and bigger share buybacks, moves that tend to drive stock prices up.

Related: Most Americans aren't benefiting from the stock market boom

Of course, the booming stock market and strong economic backdrop raise the question: Are tax cuts really needed?

By stimulating an already healthy economy, Congress could cause the market and economy to overheat. That would force the Fed to speed up rate hikes, potentially dealing a blow to the recovery. The other concern is whether the tax plan could be so expensive that it leaves United States with less ammunition to fight the next recession.

Nonetheless, many on Wall Street are betting the bull market will continue into 2018, though perhaps at a more modest pace.

After the incredible rise, a pause would be healthy. The S&P 500 hasn't fallen 3% from a previous high point, over one day or several, since November 2016. That's easily the longest stretch on record.

"We are definitely long overdue," said Sam Stovall, chief investment strategist at CFRA Research. "It's just a matter of time."

Indiana Coronavirus Cases

Data is updated nightly.

Cases: 1007681

Reported Deaths: 16470
CountyCasesDeaths
Marion1355212121
Lake664101166
Allen57993801
Hamilton46350465
St. Joseph44397615
Elkhart35949510
Vanderburgh32251480
Tippecanoe27933260
Johnson25107445
Hendricks23897359
Porter22929365
Madison18748409
Clark18557252
Vigo17479303
Monroe15263200
LaPorte15173250
Delaware15073263
Howard14748290
Kosciusko12348148
Hancock11728176
Bartholomew11639180
Warrick11292189
Floyd11108215
Wayne10986253
Grant10082220
Morgan9472176
Boone8926115
Dubois8271131
Henry8229152
Dearborn822393
Noble8031106
Marshall7939135
Cass7546121
Lawrence7457171
Shelby7189119
Jackson698289
Gibson6597115
Harrison649192
Knox6421106
Huntington6395100
DeKalb632399
Montgomery6264111
Miami593398
Putnam581278
Clinton576171
Whitley565755
Steuben562576
Wabash5332104
Jasper532079
Jefferson511297
Ripley500586
Adams482576
Daviess4677114
Scott438974
Greene425196
Wells424888
Clay423360
White418764
Decatur4169102
Fayette406587
Jennings387361
Posey376644
Washington359151
LaGrange359078
Randolph3452100
Spencer340243
Fountain335760
Sullivan329452
Starke317171
Owen314771
Fulton312667
Orange293664
Jay284645
Franklin265643
Perry265452
Rush262432
Carroll261934
Vermillion258654
Parke231426
Pike229243
Tipton228159
Blackford193142
Pulaski183757
Crawford159823
Newton158348
Benton150617
Brown146747
Martin138719
Switzerland135011
Warren121116
Union107016
Ohio84613
Unassigned0540

Ohio Coronavirus Cases

Data is updated nightly.

Cases: 1519304

Reported Deaths: 23955
CountyCasesDeaths
Franklin1642651696
Cuyahoga1464072459
Hamilton1053661431
Montgomery740661279
Summit617841111
Lucas56338917
Butler51580718
Stark466811064
Lorain35628585
Warren32836377
Mahoning30787693
Clermont28193330
Lake27063448
Delaware24208164
Licking23939294
Trumbull22885561
Fairfield22395247
Greene22350326
Medina22047313
Clark19863354
Richland18586292
Portage17978252
Wood17454224
Allen16001279
Miami15582306
Muskingum14831185
Columbiana14080274
Wayne13791271
Tuscarawas12724311
Marion11976180
Scioto11469162
Pickaway11373142
Erie10904184
Ross10586203
Lawrence9759153
Ashtabula9741204
Hancock9707155
Belmont9309209
Geauga8965157
Jefferson8567199
Huron8404143
Union819859
Washington8093144
Sandusky7827151
Athens777779
Knox7739144
Darke7689158
Seneca7372145
Ashland6967130
Auglaize679799
Shelby6530115
Brown636491
Crawford6274130
Defiance6218105
Mercer616493
Fulton602896
Highland600499
Madison594578
Guernsey593071
Logan591096
Clinton583793
Preble5720125
Putnam5335110
Williams529288
Perry518363
Champaign513173
Jackson510273
Ottawa488586
Coshocton484683
Morrow458858
Pike434367
Fayette429263
Hardin419480
Gallia418467
Adams417195
Van Wert372382
Henry365372
Holmes3642125
Hocking356782
Wyandot324662
Carroll302365
Paulding280347
Meigs265851
Monroe216254
Noble200347
Morgan194033
Harrison182146
Vinton166625
Unassigned05
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