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Dow Is a Dog No More as Reopening Trade Puts 30,000 Within Sight

Lu Wang and Claire Ballentine
·3 min read

(Bloomberg) -- Left for dead as the pandemic crippled its marquee members, the Dow Jones Industrial Average has bounced back with the recovery trade. Its best November in almost a century has put it on the brink of 30,000.

The 30-company benchmark has surged 13% this month thanks to rallies in banks and manufacturers. Up in eight of the last 11 sessions, the Dow sits within 48 points of the milestone. It gained 1.6% Monday to close at an all-time high of 29,950.44.

Recovery has been swift for the 124-year-old gauge, which took lumps earlier in the year when influential components such as Boeing Co. plunged and investors gravitated to the S&P 500 and Nasdaq 100 because of their higher concentration in stay-at-home tech makers. Now the Dow is benefiting as promising vaccine news lifts the banks, industrial companies and retail-facing stocks that make up 43% of its weighting.

“The Dow has these big cyclical companies, and if the overall economy rebounds, you’re going to see more of that reaction in the Dow,” said Mike Bailey, director of research at FBB Capital Partners. “Three weeks ago investors hated them and now they love them.”

The Dow climbed 1 percentage point more than the Nasdaq 100 Monday. Boeing jumped 8.2%, extending its November gain to 40%. It is on track for the best month since 1982. Walt Disney Co., whose cruise lines and theme parks were forced to shut during the worst of lockdowns, rose 4.6%, wiping out its 2020 loss.

Fewer than half its members are higher for the year after the pandemic shutdowns dented the prospects for Disney, 3M Co. and JPMorgan Chase & Co. Boeing is still lower by 38% in 2020 as it deals with slashed orders and the fallout from its grounded 737 Max jetliner.

The blue-chip index spiked to a record after Moderna Inc.’s vaccine was shown to be 94.5% effective in a preliminary analysis of a large late-stage clinical trial. Shares of the drugmaker surged as much as 15%. Companies poised to benefit from a reopening, such as cruise lines and air carriers, outperformed. A week ago, Pfizer Inc. said its vaccine was 90% effective.

The Dow has beaten the Nasdaq 100 by more than 4 percentage points in November, on course for its best relative performance in four years. Despite the advance, the gauge is only up 5% this year, a fraction of the 38% rally that the Nasdaq 100 has achieved.

“We have a clear catalyst that in four to five to six months -- hopefully sooner -- this economy will be back to normal, society hopefully will be back to normal,” Tom Essaye, a former Merrill Lynch trader who founded “The Sevens Report” newsletter, said by phone. “And now you can look at some of these industirals and say, ‘Wow, finally we can see some growth in them,’ and really, that’s what this whole thing has been about.”

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