Who needs analysts when you have President Trump? — some are asking sarcastically. It would seem investors were nonetheless paying attention to the President’s bullish and unwavering Buy recommendation of equities. Those same people are now wondering will the gains hold?
On Wednesday the stock market came roaring back in a record-breaking post-Christmas rally as the Dow Jones industrial average, S&P 500 and Nasdaq each closed the trading session 5% or higher. The blue chip index, which closed 5% higher on the day, logged its first-ever 1,000-point day. It also achieved another rarity — each of the 30 components closed in positive territory, led by a 7% surge in Nike (NKE). The Dow was also aided by Microsoft (MSFT), Home Depot (HD) and Visa (V), which enjoyed returns of 6% or more.
Meanwhile, a massive rebound in the FAANG stocks — Facebook (FB), Apple (AAPL), Amazon (AMZN), Netflix (NFLX) and Google (GOOG , GOOGL) — led the charge for the Nasdaq Composite Index, which rose 5.8% on strong volume, while the S&P 500 — thanks to gains of 116.60 points — also closed 5% higher. If judging on a percentage basis, Wednesday marked the strongest one-day gains for all three major indexes since March 23, 2009.
Even the Russell 2000 — home to the small cap names — participated in the rally, adding a 5% gain of its own. Despite Wednesday’s rally, however, all three major indexes are still sharply lower for the month of December and are in correction territory from their peaks of 2018. Nasdaq remains in bear market territory — defined as a correction of 20% or more. And this highlights the extent to which the FAANG have been clobbered. Only Netflix and Amazon are in positive territory on the year.
Speaking of Amazon, the company on Wednesday ended the session 9.5% higher after announcing a record-breaking holiday season, saying "tens of millions" of customers have signed up for its Amazon Prime membership program. It is possible that Amazon’s bullish holiday sales comments, which coincided with a market rise the pre-market, sparked Wednesday’s rally? Who knows.
What we do know is that on December 25, during an interaction with reporters, President Trump said, “We have companies — the greatest in the world, and they’re doing really well.” Adding, “They have record kinds of numbers. So I think it’s a tremendous opportunity to buy. Really a great opportunity to buy.”
Trump, who often took credit for the market’s bullish rallies, was responding to reporters who questioned the state of the stock market, which was seemingly in a state of panic on Christmas Eve Monday as the Dow plunged 653 points, or 3%. This drop came on the heels of another beating last Friday as the Dow Jones Industrial Average closed 414 points lower (or 1.8%), which amounted to a drop of 1,655 points, or 6.9% in just one week.
I won’t proclaim that investors were solely basing Wednesday’s rush to buy stocks on President Trump’s advice. But as a long-term bull, I will say it was advice that I agreed with.