US stocks rallied on Tuesday, with the Dow Jones Industrial Average closing above 18,000 for the first time ever.
The Dow Jones Industrial Average gained 64.73 (a 0.4% increase) to close at 18,024.17. The S&P 500 Index gained 3.63 points (a 0.2% percent increase) to 2,082.17. While the Nasdaq composite lost 16 points to close at 4,765.42.
The Dow is up about 175% from its 12-year closing low on March 9, 2009.
According to the US Commerce Department the economy grew at the fastest rate in the third quarter in over 11 years.
It also revised its GDP estimate up from 3.9% to 5%. This has significantly boosted confidence in the US economy – driving the surge in US stocks.
Wayne Kaufman, chief market analyst at Phoenix Financial Services in New York, commented on the news:
“Everyone is surprised, and I’m definitely pleased. But the question is, how can inflation be so low when GDP is so high? Either this is just a one-off and GDP will fall back dramatically, or we’ll see a pickup in inflation, which could put more pressure on the Fed.”
The Nasdaq biotech index fell 4.6 per cent, its biggest one-day drop in over 6 months. Celgene Corp fell 6.5% to $106.12 and Biogen dropped 4.7 percent to $335.76.
Gilead Pharmaceuticals dropped by 3.7% to $89.45, after Monday’s plunge of 14 per cent driven by Express Scripts’ decision to drop Gilead’s hepatitis C treatment in favor of a cheaper option.
“This is just a knee-jerk reaction, based on a bear thesis that Express Scripts will start to dictate prices,” said Kaufman. “I don’t see how this is any different than any other company in another sector getting more competition. Soon people will go through the stocks one-by-one to see which got oversold.”