Dow pushes higher, Mondelez pops after Unilever bid

No stopping US stocks in February. The Dow eased through the 20,700 level to notch up another record high. It’s within spitting distance of 21,000 after touching a high of 20,755, meaning it’s just over 1% short of the milestone. With the prospect of a fiscal bombshell from president Trump it’s hard to see the Dow not breaching the level soon. The momentum is so strong right now but at what point do investors say enough is enough? If Trump’s tax policy underwhelms that could be the spark, while significant hurdles to financial regulation reform in Congress could start to weigh on banks, which have led the Dow’s gains since November.

The S&P 500, a much better gauge of US equities, is also posting a record high as the February bull rally continues apace. Overbought? It’s about 8% off 1999 levels in terms of a price-to-sales ratio so there could be a wee bit left to travel before a top is seen. Commodity prices have pushed energy stocks and miners higher and there is renewed hope that the Fed will hike rates as early as March (tightening now positive for equities by all accounts).

Looking at individual stocks, big earnings beats from Wal-Mart and Home Depot offered the most support for the Dow as the pair came in ahead of consensus.

Mondelez catches the eye. It rose 5% today after Kraft Heinz’s failed bid for Unilever reignited the prospect of a tie-up. General Mills and Kellogg, two of the other firms potentially in the crosshairs of Warren Buffett and 3G, also climbed after falling last Friday.

Kraft is down a touch, falling 3%, but that’s a lot less than it rose on Friday. Similar to Unilever, which has retained some of the takeover premium from last week, the prospect of a deal has investors hoping for more and they seemed prepared to hold the stocks for longer. In this environment, traders would be well advised to consider which other UK-listed firms will be in line for a takeover given the discount afforded by sterling weakness.

Neil Wilson

Senior Market Analyst

ETX Capital