WASHINGTON (REUTERS, WASHINGTON POST)- The stock market bellwether Dow Jones industrial average reached a new high Tuesday (Aug 1) as it neared the 22,000 mark, buoyed by the strong financial performance of some of America's best-known corporations.
The Dow entered August coming off its best monthly performance since February, the first full month President Donald Trump was in office, when it increased 2.54 per cent.
It closed Tuesday at 21,963.03 after reaching an intraday high of 21,990.96 earlier.
The tech-heavy Nasdaq exchange and the broader Standard & Poor's 500 index have also put in strong performances in what has been a mostly positive year for Wall Street.
Trump took to Twitter Tuesday morning to tout the gains, taking particular note of the market's surge since his November victory.
But the broader market saw a bigger rally under former President Barack Obama. The benchmark S&P 500 Index has gained 9.4 per cent since Trump took office on Jan 20, lagging a 16.2 per cent S&P gain during Obama's first months in office.
While stocks jumped after Trump won and the Republicans claimed control of both houses of Congress, analysts said the market's recent run probably has less to do with politics than it does the healthy performance of the nation's public companies.
If anything, Congress' failure to repeal and replace the Affordable Care Act or the nation's tensions with North Korea should have dampened investors' enthusiasm, some said.
"The market hasn't been paying attention to Washington," said Howard Silverblatt, a senior index analyst at S&P Dow Jones Indices. "It's paying attention to fundamentals," such as revenue, profits and other corporate metrics.
Trump also sent a Twitter message bragging about corporate America's high profits under his presidency, prompting critics to say he was undercutting Republican arguments in favor of a tax cut for corporations.
As Republicans in Washington try to refocus on taxes after the collapse of their failed drive to repeal Obamacare, Trump sent a morning tweet that said: "Corporations have NEVER made as much money as they are making now."
Corporate lobbyists and Republicans consistently argue that a cut in the corporate income tax is needed to help corporations be more competitive. But highlighting corporate profits could diminish that argument.
The largest US public companies have seen profits accelerate in 2017, with quarterly earnings rising at a double-digit pace compared with a year ago, according to Thomson Reuters data.
Full-year earnings are expected to be up 11.5 per cent, which would be the strongest growth since 2011. More than six months into his presidency, Trump still sends out tweets that catch aides and allies off guard and sometimes clash with Republicans' messaging on their policy agenda.
The Trump tweet "takes the edge of urgency off the plea to reduce the burden on corporations," said William Galston, a senior fellow at the Brookings Institution think tank.
Many of the world's largest companies have been reporting positive quarterly financial results in recent weeks.
Earnings from jetliner manufacturer Boeing led the way, accounting for 56.5 per cent of the Dow's gain for the month of July, according to Silverblatt. Boeing's shares rose 8 per cent toward the end of the month after it reported profits that beat analysts' expectations, and the company raised its forecasts for the year.
If the Dow "goes over 22,000, obviously it's Boeing," Silverblatt said.
Fast food giant McDonald's accounted for 23 per cent of the increase in July as it too reported stronger sales and profits than many analysts projected.
The highfliers offset the lackluster performance of companies like IBM and Under Armour, the latter of which announced a round of layoffs Tuesday and lowered its sales projections for the year.
Some analysts said the stock market's performance still suggests that investors are hopeful the
Trump administration will follow through on efforts to boost infrastructure spending and cut taxes. That optimism suggests a pullback is in the offing if lawmakers continue to struggle to pass legislation and economic growth remains sluggish.
"What this stock market looks like is that it's priced for legislative perfection," Kristina Hooper, a global market strategist at Invesco, an independent investment management firm. "And we seem to be set up for less-than-perfect legislative outcome."