Dow hits record high in the midst of Comey hearing
Wall Street doesn’t seem worried at all about FBI director James Comey’s hearing in Congress.The Dow, after initially trading sideways, jumped to a new all-time high Thursday afternoon toward the end of the highly-anticipated testimony. The index ended the day just slightly higher, but the Nasdaq closed at a fresh record.
The reaction suggests Wall Street believes Comey’s testimony produced no smoking gun that could further imperil President Trump’s stalled economic agenda.
“It doesn’t feel like there was a gotcha moment that will stop the agenda,” said Art Hogan, chief market strategist at Wunderlich Securities. “There’s less of a concern this becomes something that is disruptive to the market.”
Investors were on guard for any new Comey bombshells. Recall that the Dow plunged 373 points on May 17 after news that Comey wrote a memo saying Trump asked him to stop the investigation of former national security adviser Michael Flynn.
“Of course we will be watching to hear what Comey has to say,” said Ryan Detrick, senior market strategist at LPL Financial.
However, Detrick said Comey’s seven-page written testimony released on Wednesday was a “relief as it didn’t suggest an impeachment” and there “was really nothing new the market didn’t already know.”
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All of this matters to Wall Street because the stock market zoomed after Trump’s victory. The incoming administration’s promises to fire up growth with tax reform, infrastructure spending and deregulation lifted the Dow from 18,333 on Election Day to above 21,000 today.
So far, Wall Street isn’t freaking out about the lack of progress on Trump’s agenda because the U.S. economy looks pretty healthy. While growth remains slow, unemployment has dropped to the lowest level since 2001 and corporate profits are robust.
“At the end of the day we have an economy that is growing and earnings that are good. The tax proposals could be the cherry on top,” said JJ Kinahan, chief strategist at TD Ameritrade.
At the same time, the Federal Reserve and other central banks continue to support global markets with extremely low interest rates.
It’s possible the Comey hearing ends up soothing markets by removing a major question mark.
“We certainly have a whole lot less concern over how this plays out than three weeks ago,” said Hogan, referring to the May 17 Comey-inspired selloff.
Still, the fact that the Comey hearing has consumed all the oxygen out of Washington shows how sidetracked the Trump administration has been from working to fulfill key promises on the economic agenda.
Keep in mind this was supposed to be the White House’s “Infrastructure Week,” highlighting a key promise that excited investors about the prospects of a stronger economy. That’s not even to mention the lack of progress on the tax reform, or at least tax cuts, investors are still banking on.
“This is a gigantic negative/delay for…really anything of a pro-growth policy nature,” Chris Krueger, a policy analyst at Cowen & Co., wrote in a report on Thursday.
Even though the Comey hearing is over, politics will continue to be on the minds of investors. Results from the snap election in the U.K. are due out Thursday evening and the outcome could shape the delicate negotiations over Brexit.
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