STREAMING NOW: Watch Now

Dow off to best start since 2003

The stock market is off to a sizzling-hot start to 2018.After enjoying a blockbuster first year under Presiden...

Posted: Jan 8, 2018 7:08 PM
Updated: Jan 8, 2018 7:08 PM

The stock market is off to a sizzling-hot start to 2018.

After enjoying a blockbuster first year under President Trump, the Dow soared another 2.3% last week and broke through 25,000. That's the strongest kickoff to a year through four trading days since 2003, a year that saw the Dow surge 25%.

The Nasdaq, fueled by powerful rallies from tech stocks like Nvidia and Micron, raced 3.4% higher last week. That's the Nasdaq's best start to a new year since 2006.

Clearly, Trump's tax overhaul is making Wall Street very excited about all the money corporations will save. Investors are also encouraged by signs that the U.S. and global economy continue to strengthen. The markets are betting more good news will come from earnings season, which begins in earnest this week.

"The global economy is providing a clearly bullish signal for earnings and stock prices," Ed Yardeni, president of investment advisory Yardeni Research, wrote in a note on Monday.

Stocks dipped a bit on Monday, with the Dow losing around 30 points.

Still, it's an impressive start considering how hard Wall Street has partied since the 2016 election. The Dow and Nasdaq have spiked about 38% since Trump's victory. Last year was the Dow's best since 2013.

It's also a huge reversal from two years ago, when worries about China's economic slowdown and crashing oil prices caused Wall Street's worst start to a year on record.

Related: Tax law to spark $450 billion buyout bonanza

Unlike the beginning of 2016, markets are unusually quiet right now. The VIX, a measure of market volatility, closed at its second-lowest level ever on January 3.

It's normal -- and even healthy -- for the stock market to take a breather by retreating. Yet the S&P 500 hasn't suffered a 3% dip since just before the November 2016 election. That's the longest such streak on record.

Few economists believe the tax overhaul will spark a lasting economic boom. Yet shareholders are poised to be rewarded anyway, especially when corporations return the mountain of money sitting overseas.

S&P 500 companies are likely to use that repatriated foreign cash to buy back around $450 billion of stock, Bank of America predicted. That buyback bonanza should help lift earnings per share and further support stock prices.

However, some believe there are caution flags flapping on Wall Street.

"Our market internal measures, including breadth, leadership, sentiment and volume, have reached extremes that warrant some attention," Katie Stockton, chief technical strategist at brokerage BTIG, wrote in a report on Sunday. She added that sentiment has become "too complacent."

If stocks do finally suffer a setback, Stockton urged investors not to freak out. "We would view it as a buying opportunity," she said.

Related: Why Wall Street's tax party could be short-lived

So, what would it take to disrupt the steady march higher on Wall Street?

One area to keep a close eye on is the bond market. The stock market looks expensive. However, investors often shrug that off because bonds rates remain extremely low, making stocks look good by comparison. Any change to that recipe could derail the stock market.

Barry Bannister, chief equity strategist at Stifel, warned in a report on Monday that a "fairly rapid rise" in bond rates will cause the S&P 500 to suffer a 5% pullback during the first six months of 2018.

What would the trigger be? The tax law that excited Wall Street. Bannister expects the bond market to begin raising rates ahead of the Federal Reserve, lifting the 10-year Treasury rate from 2.5% now to 2.96%.

"Fiscal stimulus actually facilities the very Fed rate hikes that begin to choke the S&P 500 in 2018," Bannister predicted.

New York Coronavirus Cases

County data is updated nightly.

Cases: 2523560

Reported Deaths: 56130
CountyCasesDeaths
Kings33405310847
Queens31536810288
Suffolk2395573605
Nassau2143703293
Bronx2076626751
New York1681074636
Westchester1436362340
Erie1064171949
Richmond889441935
Monroe842971188
Orange57538920
Rockland53112779
Onondaga52054761
Dutchess35615499
Albany30838390
Oneida28644589
Broome24451405
Niagara24031397
Saratoga20287200
Ulster17273278
Schenectady16731227
Rensselaer14808167
Putnam1249298
Chautauqua12428175
Oswego11668113
Chemung10932156
St. Lawrence10524127
Steuben10133173
Ontario9352110
Jefferson888076
Cayuga8658107
Sullivan847383
Wayne816784
Cattaraugus7732115
Genesee7013132
Herkimer6806128
Clinton672540
Tompkins650459
Fulton6331104
Madison6187102
Montgomery5966141
Livingston572771
Warren546084
Cortland534279
Tioga509471
Columbia5009111
Chenango468986
Allegany461597
Washington461367
Otsego457555
Wyoming439358
Greene438586
Orleans434187
Franklin428020
Lewis360338
Delaware356047
Seneca274163
Essex230731
Schoharie229521
Yates164728
Schuyler153817
Hamilton4383
Unassigned14426
Out of NY0317
Utica
Cloudy
57° wxIcon
Hi: 56° Lo: 50°
Feels Like: 57°
Oneonta
Cloudy
51° wxIcon
Hi: 56° Lo: 50°
Feels Like: 51°
Herkimer
Cloudy
57° wxIcon
Hi: 58° Lo: 51°
Feels Like: 57°
Old Forge
Cloudy
57° wxIcon
Hi: 54° Lo: 49°
Feels Like: 57°
WKTV Radar
WKTV Temperatures
WKTV Severe Weather
Game Day Deals - New Deals Each Week
Chapter Aesthetic October Giveaway
Cool To Be Kind 2021
Looking for work or looking to hire? Check out the WKTV Job Fair!
Saluting Those Who Are Proud 2 Serve