Here’s who to thank for historic stock market highs



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Tuesday was a momentous occasion for the stock market, as some of the market’s most visible benchmarks hit record highs. the Dow Jones Industrial Average (DJ INDICES: ^ DJI) broke the 30,000 mark for the first time, while the S&P 500 (SNPINDEX: ^ GSPC) also set a new closing high. Even the Nasdaq composite (NASDAQINDEX: ^ IXIC), who had been faster to set new records earlier in 2020, finished just short of his peak.

Today’s stock exchange

Index

Percent change

Point change

Dow

+ 1.54%

+455

S&P 500

+ 1.62%

+58

Nasdaq composite

+ 1.31%

+156

Data Source: Yahoo! Finance.

Yet when you take a close look at the development of the stock market, there are a few areas that really stand out. Energy stocks have been the best performers overall, hoping that an early end to the coronavirus crisis could spur a return to more normal levels of energy consumption. But with energy now representing a relatively small share of the overall stock market, the gains in financials have had even more influence in making investors adopt more optimistic views.

A rude awakening

It’s easy to see what made the energy stocks soar. Crude oil prices jumped 4% on Tuesday, flirting with the level of $ 45 a barrel. Oil markets are closely examining a possible recovery in demand if the COVID-19 pandemic is resolved thanks to recent advances in vaccines and treatment options. This raised the Energy Select Sector SPDR (NEW: XLE) more than 5%.

Sunset silhouetted against an oil well, a derrick and workers.

Image source: Getty Images.

Players across the spectrum have done well. The big oil giants have had a big boost, with ExxonMobil (NYSE: XOM) climb 7%. Refinery inventories continued to recover the ground lost earlier in the year, with Valero Energy (NYSE: VLO) in the lead with an increase of 4%. And actions of oil services like Halliburton (NYSE: HAL) also lived up to the outlook for exploration and production companies to revive their activity levels and need more materials and services in 2021 and beyond.

The main assumption behind the COVID-19 investment thesis is that when the demand for energy increases, it will go to fossil fuels. This seems to be increasingly called into question, especially with the surge in interest in electric vehicles and renewables more broadly. However, in the short term, optimism in the oilfield could drive traditional energy values ​​up significantly.

Bet on a rebound

The financial sector has not done as well as energy, with SPDR of the selected financial sector (NYSEMKT: XLF) up 3.5%. But with financial institutions currently having a much larger total market capitalization than energy stocks, the gain had a greater influence on the stock market as a whole.

The big banks have been most successful in raising the industry. Among retail players, Bank of America (NYSE: BAC) led the way with a gain of almost 6% JPMorgan Chase (NYSE: JPM) weighed with an increase of almost 5%. On the investment side, Morgan stanley (NYSE: MS) had a healthy gain of 5.5%.

Yet there were also gains elsewhere. Insurance Conglomerate Berkshire Hathaway (NYSE: BRK-A) (NYSE: BRK-B) added to its recent run with a gain of 2%, while the fund giant Black rock (NYSE: BLK) increased by almost 2.5%.

The banks would benefit greatly from further economic stimulus from the federal government, and that looks more likely in the coming months. Meanwhile, the sector was severely beaten throughout 2020, pushing value investors to reap the rewards of a rebound.

Give thanks

It’s easy to see high-end tech stocks as pushing the markets higher. But when you take a closer look, you’ll often find pockets of strength in places you wouldn’t otherwise notice. This is important for investors to keep in mind when looking for the best investments for 2021.



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