U.S. Stocks Inch Higher; Dow Nears Historic 20,000 Level

Demand for higher-yielding assets are helping to boost U.S. equities on Tuesday, while pressuring commodities and currencies.

U.S. Equities

The major U.S. stock indexes are trading higher on Tuesday as investors returned their focus to the prospects of a strong economy in 2017, given Donald Trump’s plan to rebuild America through massive fiscal spending. There was also little reaction to the geopolitical events in Turkey and German on Monday, suggesting they are isolated incidents and not likely to effect the global economic outlook.

At mid-morning, the Dow was up about 90 points, slightly below the 20,000 historical target. The Blue Chip average was led higher by financial giant Goldman Sachs. The benchmark S&P 500 Index was led higher by financial and telecommunication stocks. The NASDAQ Composite reached a new all-time high.

Volume is expected to be low and should continue to drop off as the week progresses. On Monday, the U.S. composite volume totaled 6.17 billion shares, the lowest since November 25, when only 3 billion shares were traded.

There are no major U.S. financial reports due on Tuesday, but investors will get the opportunity to react to a slew of earnings reports.

Treasury Yields

U.S. Treasury yields rebounded from Monday’s weakness and investor shrugged off the events in Turkey and Germany and returned their focus to the strength of the U.S. economy and expectations of higher interest rates in 2017.

The yield on the benchmark 10-year Treasury notes rose to around 2.5764. The 30-year U.S. Treasury Bond came in at 3.156.

Gold

Gold fell on Tuesday as investors reacted to a strong U.S. Dollar and rising equity prices. Gold tends to compete for investment capital with stocks so the often move in opposite directions. Essentially, the market is saying, “do you want to own paper or hard assets?” At this time, investors want the paper. If gold does rally, it will likely be fueled by short-covering and position-squaring ahead of the Christmas holiday.

Crude Oil

West Texas Intermediate and Brent Crude Oil traded higher on Tuesday as investors started to think about the possibility of shrinking global supply. This line of thinking is being fueled by predictions of a steep draw in U.S. crude oil stocks.

According to Reuters, Wednesday’s U.S. Energy Information Administration’s weekly inventories report is expected to show a 2.4 million barrel draw down.

In other potentially bullish news, Russian Energy Minister Alexander Novak told Russian newspaper Verdomosti that Russia may extend a production cut beyond the first half of the year if needed.