The Dow Tops 44,000 and the S&P 500 Breaks 6,000. Here’s Why Stocks Keep Climbing.

S&P 500 briefly surpassed the 6,000 mark for the first time in history, while the Dow Jones Industrial Average touched 44,000. However, both indexes ultimately fell short of these milestones by the market close, capping off a volatile week marked by Donald Trump's return to the White House and a Federal Reserve interest-rate cut. According to Clark Geranen, chief market strategist at CalBay Investments, the 6,000-point threshold for the S&P 500 represents a "psychologically significant milestone" that could draw in more investors, particularly those holding assets in bonds or money-market funds.

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Geranen pointed out that over the past week, volatility in the stock market, as measured by the Cboe Volatility Index (VIX), dropped sharply, easing investor fears and shifting sentiment toward optimism. "What we saw was a trifecta of factors," Geranen explained, "with election results providing market certainty, positive investor sentiment, and a fairly healthy economic environment all contributing to the S&P 500’s rise to 6,000."

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The S&P 500 climbed 0.4% on Friday, closing at 5,995.54 after reaching a high of 6,012.45 during the session. Meanwhile, the Dow rose 0.6% to finish at 43,988.99, after crossing 44,000 earlier in the day. This latest rally came 189 trading days after the S&P 500 first closed above 5,000 back on February 9, marking one of the fastest gains of 1,000 points in the index’s history.

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Within the S&P 500, some of the strongest performers since February 9 have included Vistra Corp., which gained 4.55%, Palantir Technologies Inc., which rose 4.49%, and Targa Resources Corp., up 2.39%. Nvidia Corp. dipped slightly, losing 0.84%, while United Airlines Holdings Inc. posted a 2.43% increase, according to Dow Jones Market Data.

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The major indexes showed solid gains for the week overall. The S&P 500 and the Dow each rose 4.7% and 4.6%, respectively, marking their best weekly performance of the year. The tech-heavy Nasdaq Composite posted a 5.7% weekly gain, its highest since September, according to data.

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This rally came in response to a combination of the Fed’s interest-rate cut and optimism surrounding Trump’s win and a potential Republican congressional sweep. On Thursday, the Fed cut the federal-funds rate by 25 basis points, a move that helped fuel the rally. Still, despite this recent optimism, investors remain cautious about potential economic turbulence ahead, with concerns about long-term Treasury yields and inflationary pressures that could emerge under Trump's second term.

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Paul Christopher, head of global investment strategy at Wells Fargo Investment Institute, commented on the immediate post-election reactions, noting that the market appears to be responding selectively to certain policy expectations. “Our experience is that these types of reactions are often not the most stable foundations for long-term investments. We’d prefer to take a closer look at Trump’s likely policy initiatives,” he said.

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Earlier in the week, a selloff in the government-debt market raised concerns as investors speculated that Trump’s policies could drive up inflation and increase the federal deficit. This led to worries that rising long-term Treasury yields might spill over into the equity market. However, those fears eased after the Fed’s rate cut on Thursday. The yield on the 10-year Treasury note declined by 3.4 basis points on Friday, settling at 4.307%, and ended the week down 5.4 basis points, marking its largest weekly decline since mid-September, per Dow Jones Market Data.

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Tony Roth, chief investment officer at Wilmington Trust, addressed concerns about inflation, stating that although some of Trump’s policies could have inflationary impacts, the market no longer believes that all his initiatives will necessarily lead to inflation. Roth also expressed confidence that stocks may continue to rally through the end of the year and possibly into January, even leading up to Trump’s inauguration.

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“I think mid-6,000s for the S&P 500 in the next couple of months is achievable,” Roth stated. “However, there will be challenging work ahead once Trump officially takes office, as investors will need to assess how he intends to create a low-tax environment without significantly increasing the deficit.”

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The stock market’s response to Trump’s victory and the Fed’s rate decision has been positive overall, though the road ahead remains complex. Investors are eyeing upcoming policy changes with a mix of optimism and caution, mindful of the economic implications of Trump’s presidency and the potential for volatility in the bond market.

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