By Mark DeCambre and Victor Reklaitis, MarketWatch
The IBB is on track for its worst daily drop since the U.K.'s
vote to exit from the European Union
The Dow industrials and the S&P 500 on Wednesday hit
all-time highs in intraday trade ahead of key meetings of European
and U.S. central banks that have kept investors on a cautious
footing. A tumble in shares of health-care companies after comments
from the U.S. president-elect and back-to-back declines in
crude-oil prices also has kept the market 's advance in check.
But a modest climb higher has been sufficient to help the main
indexes to notch fresh records.
The Dow Jones Industrial Average set an all-time trading high of
19,276.25 and most recently was trading up 10 points, or less than
0.1%, at 19,264, on track for its third consecutive record close. A
1% rise in shares of Goldman Sachs Group(GS) helped to support the
blue-chip benchmark, while a slump in health-care shares of Johnson
& Johnson(JNJ)Pfizer Inc.(PFE), and Merck & Co. Inc.(MRK),
tumbled after President-elect Donald Trump threatened to cut drug
prices
(http://www.marketwatch.com/story/president-elect-trumps-promise-to-bring-down-drug-prices-sends-biotech-etfs-slumping-2016-12-07).
"I'm going to bring down drug prices," Trump told Time in his
"Person of the Year" cover story
(http://time.com/time-person-of-the-year-2016-donald-trump/). "I
don't like what has happened with drug prices."
The iShares Nasdaq Biotechnology ETF(IBB), the most widely used
way to place bets on the biotech space, sank 4.5%, and was on track
for its worst daily decline since after the U.K. vote to abandon
its membership with the European Union roiled markets in late June,
according to FactSet data.
The IBB's drop weighed on the Nasdaq Composite Index which was
the worst performer among the three main benchmarks, down 0.2% at
5,322.
Meanwhile, the S&P 500 index set an intraday trading high of
2,214.74, exceeding its intraday high set Nov. 30, and was most
recently up less than 0.1%, at 2,213, with all but one of the
S&P 500's 11 sector in positive territory. Health-care led the
way lower, with a 1.8%, decline.
On Tuesday, the S&P 500 finished 0.3% higher, the Dow gained
0.2% and finished at an all-time high for a second straight session
(http://www.marketwatch.com/story/dow-reaches-for-a-fresh-record-but-itll-be-a-struggle-2016-12-06),
and the Nasdaq Composite added 0.5%.
The stock market's postelection climb has been underpinned by
hopes that Trump will follow through with a slate of pro-business
policies, including boosting infrastructure spending and cutting
taxes for the wealthy. However, some strategists and traders are
concerned that a pullback
(http://www.marketwatch.com/story/gundlach-says-the-trump-trade-is-losing-steam-2016-12-02)
might be in the offing because the market has climbed too fast and
too furiously.
"It appears that nothing can stop the equity rally," said Naeem
Aslam, chief market analyst at ThinkMarkets UK, in a note.
"If you look at the volatility index, it has dropped near the 11
handle, which confirms that appetite for riskier assets is strong,"
he added, referring to the CBOE Volatility Index . "Buying
volatility at these levels may not be that much of a bad idea."
Other strategist say the market has traded in a relatively
narrow range since 2014 and make the case that for that reason the
recent monthlong Trump rally has a shot at moving higher into the
end of the year.
"It has only been about four weeks since the breakout for stocks
and a lot of people are looking at this to be quickly aborted, but
the market shouldn't be faulted for expecting more," said Bruce
Bittles, chief investment strategist at brokerage firm Robert W.
Baird & Co., a brokerage.
Another factor that may be supporting stock gains is traditional
selling patterns that occur at the end of the year aren't being
followed because investors are making bets on lower taxes under a
Trump administration. "Anyone who has gained [in December] are not
going to want to sell their stocks and pay taxes in April 2017,
when they can wait till 2018," he said. Of course taxes on profits
from the sale of assets could be higher then, but Bittles says Wall
Street traders are betting that it makes more sense to wait and
see, which is reducing traditional selling of stocks to take
year-end profits and encouraging buying.
Read:Why the rally by U.S. stocks is 'just getting started'--in
one chart
(http://www.marketwatch.com/story/why-the-rally-by-us-stocks-is-just-getting-started-in-one-chart-2016-11-28)
Other markets:European stocks
(http://www.marketwatch.com/story/credit-suisse-miners-push-stoxx-europe-600-toward-highest-close-since-september-2016-12-07)
gained, with banks and miners among the session's big winners, and
Asian markets closed broadly higher
(http://www.marketwatch.com/story/bank-stocks-surge-as-asian-markets-post-gains-2016-12-06).
Oil futures
(http://www.marketwatch.com/story/oil-prices-continue-to-backtrack-as-investors-question-opec-deal-2016-12-07)
retreated, while gold futures and a key dollar index
(http://www.marketwatch.com/story/dollar-flattens-out-as-investors-look-ahead-to-fed-ecb-meetings-2016-12-07)
were modestly higher.
Individual stocks: Ahead of the opening bell, Brown-Forman
Corp.(BFA) reported quarterly sales that topped estimates
(http://www.marketwatch.com/story/brown-forman-sales-top-estimates-sticks-with-full-year-view-2016-12-07),
as the maker of Jack Daniel's whiskey backed its full-year
forecast. The stock wasn't yet active in premarket trade.
Handbag seller Vera Bradley Inc.(VRA) cut its full-year outlook
(http://www.marketwatch.com/story/vera-bradley-shares-slump-as-company-cuts-outlook-2016-12-07)
after missing its own guidance range for the third quarter. Shares
were tumbling 7% in early trade.
Economic news: A report on consumer credit is due at 3 p.m.
Eastern.
The JOLTS report, or Job Openings and Labor Turnover Survey,
showed that job openings were unchanged at 5.5 million in October,
according to Labor Department.
Investors also are bracing for the European Central Bank's
policy-setting meeting
(http://www.marketwatch.com/story/how-italys-no-vote-might-be-the-ecbs-silver-lining-2016-12-05)
on Thursday. The Federal Reserve entered the so-called blackout
period Tuesday ahead of its meeting Dec. 13-14, so there are no Fed
speakers on the docket.
Check out:
(END) Dow Jones Newswires
December 07, 2016 11:33 ET (16:33 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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