Wall Street adds to record rally, Dow approaches 20,000

By Noel Randewich

(Reuters) - U.S. stocks racked up new all-time highs on Tuesday and the Dow Jones industrial average ended fewer than 100 points away from the 20,000 mark as a post-election rally showed no signs of fatigue.

All three major indexes established record highs. The Dow has climbed about 9 percent since the Nov. 8 election, with gains fuelled by expectations that President-elect Donald Trump will reduce taxes and regulation and stimulate the economy.

Nine of the 11 major S&P sectors rose, with the technology index's <.SPLRCT> climbing 1.23 percent. The index had lost 0.5 percent on Monday after posting its largest weekly advance in a year last week.

 

"What we're seeing is the rally broaden out a little bit from beyond the Russell 2000 and the financial sector," said Michael O'Rourke, chief market strategist at JonesTrading in Greenwich, Connecticut. "If you're bullish, tech does look attractive here."

Apple added 1.67 percent and provided the biggest support to the S&P and Nasdaq, while IBM rose 1.69 percent, helping lift the Dow.

Other tech giants Microsoft and Amazon were up 1.30 percent and 1.87 percent, respectively.

Some investors see the 20,000-level on the Dow as a psychologically important signal of broad positive sentiment.

The U.S. stock market's sharp run has also been supported by positive economic data, including a strong labour market and S&P 500 companies' results, which in the third quarter snapped a year-long earnings recession.

"Investors are encouraged by expectations that Trump and a GOP-controlled Congress will enact pro-growth policies and we're seeing modest inflation creep in while housing remains stable and wages continue to firm," said Terry Sandven, chief equity strategist at U.S. Bank Wealth Management.

Investors are also keeping a close watch on the Federal Reserve's two-day meeting, starting Tuesday, with the central bank widely expected to lift interest rates for the only second time since the financial crisis.

A hike of 25 basis points is priced in, but investors will be examining the Fed's statement and economic forecasts for signs of the central bank's thinking about how Trump's election has affected the outlook for growth and inflation.

The Dow Jones industrial average <.DJI> rose 0.58 percent to end at 19,911.21 points and the S&P 500 <.SPX> gained 0.65 percent to 2,271.72.

The Nasdaq Composite <.IXIC> added 0.95 percent to 5,463.83.

Following recent gains, some investors are concerned about valuations. The S&P 500 is trading near 17.7 times forward 12-month earnings, above the 10-year median of 14.7 times, according to StarMine data.

"Valuations are elevated at the moment and we know that the pace that equities are advancing at won't be sustainable unless earnings continue to grow," said Sandven.

Inovalon Holdings fell as much as 37.7 percent to a life-low of $9.52 after the healthcare data analytics company's fourth-quarter revenue forecast came in below expectations.

About 7.4 billion shares changed hands in U.S. exchanges, roughly in line with the average volume over the last 20 sessions.

Advancing issues outnumbered declining ones on the NYSE by a 1.46-to-1 ratio; on Nasdaq, a 1.26-to-1 ratio favoured advancers.

The S&P 500 posted 39 new 52-week highs and 2 new lows; the Nasdaq Composite recorded 188 new highs and 41 new lows.

(Additional reporting by Caroline Valetkevitch and Tanya Agrawal; Editing by Nick Zieminski)