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US stocks hit record highs as Dow adds 300 points, but pharma sink

Last updated: 22:00 07 Dec 2016 GMT, First published: 08:14 07 Dec 2016 GMT

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US stocks hit fresh record highs on Wednesday, with the S&P 500 marking its biggest single-day gains since the presidential elections, as investors largely shrugged off declines in health care stocks.

The S&P 500 rose 1.3% to a fresh record high close of 2,241.35, its biggest one-day gain since November 7. The telecommunication sector led the gains, followed by real estate and tech stocks.

The Dow Jones Industrial Average rose 1.6%, adding nearly 300 points to hit a record closing high of 19,549.62. The Nasdaq Composite also rose 1.1%, although it ended slightly off of its all-time high, at 5393.76.

The rally came despite a broad sell-off in pharmaceutical stocks after US President-elect Donald Trump said in a Time magazine interview that he intends to bring down drug prices. Read more.

The S&P Midcap 400 closed 1.2% higher at 1,677.79, having scaled a record high intraday of 1679, and the S&P Smallcap 600 up 1.1% at 841.51, again posting an intraday record high of 842.


Early trading

US stocks managed to reverse initial weakness and post fresh record highs on Wednesday, while biotech stocks were spooked by President-elect Donald Trump’s proclamation to get tough on high drug prices – ripping a page out of his rival for the White House, Hillary Clinton’s campaign book.

The S&P 500 market bellwether was up 0.3% at 2219.22 -  a record intraday high, as was the Dow Jones Industrial Average, up 0.5% at 19,343.62.

The market was buoyed by news that although not stellar, job creation was still unfettered by last month’s elections.

US job openings fell modestly in October but were broadly in line with market expectations, while hires were little changed as the labour market continues to approach full employment.

The number of job openings edged lower to 5.53mln in October from 5.63mln in September, according to the Department of Labor. This was broadly in line with projections of 5.5m.

The so-called JOLTS report is closely tracked by the Federal Reserve chair Janet Yellen as a gauge of worker confidence. The hiring rate was steady at 3.5 per cent while the “quits rate” – the number of quits as a percentage of paid employees – was also unchanged at 2.2%.

The jobs report released last week showed that the US economy added 178,000 jobs in November versus a 175,000 forecast, compared to 142,000 jobs in October. Markets have already priced in a 100 per cent chance of the Fed raising interest rates at its December meeting so the latest data might take the edge off 100% without changing the outcome.

S&P 500 gainers were tech stocks, led by hard drive storage provider Western Digital (WDC) and Micron Technology (MU). Western was up 7.6% to $68.69 after updating with a bullish outlook and after it extended a patent licensing deal with Samsung. The new deal will last until the end of 2024. Western Digital raised its revenue outlook after making the announcement. Micron was up 4.8% to $19.97 after the semiconductor solution provider said it has completed the acquisition of the remaining stake in Taiwan’s Inotera Memories Inc. for approximately $4bn. Micron had signed an agreement in Dec 2015 to acquire the remaining 67% stake in Inotera.

Pharma Mylan () which mid-year became a focal point for attacks by Clinton for price rises on its EpiPen and other drugs, was already reeling on Wednesday as part of a restructuring. But things turned worse after Trump said he would get tough with drug companies – who had hitherto thought they were safe.

Mylan was the seventh biggest faller on the S&P 500, down 4.2% to $34.35 and was in good company as other drugs firms dominated the decliners too. Among them Endo International (NASDAQ:ENDP), down 4.9% to $15.09, Celgene Corporation (NASDAQ:CELG) down 5.5% to $110.99, McKesson Corp. (NYSE:MCK) down 4.2% to $139.36, Regeneron Pharmaceutical (NASDAQ:REGN) down 5% to $350.60 and Vertex Pharmaceutic (NASDAQ:VRTX) down 4.7% to $74.46.

The S&P Midcap 400 was up 0.5% while the S&P Smallcap 600 was up 0.4% to 835.

Oil prices were 1.5% weaker at $50.16 but that didn’t reflect the real world. As doubts about the effectiveness of OPEC’s production cut deal continued to rise, the EIA reported a 2.4mln-barrel fall in commercial inventories for the week to December 2. That was more than double the forecast of decline.

The report came a day after the American Petroleum Institute estimated commercial inventories had declined by 2.21mln barrels in the same period. All consistent there then.


Pre-Open

US stocks are expected to open softer on Wednesday, pulling away from reaching fresh record highs as oil inventory data is eyed anxiously.

The S&P 500 future is indicated down 0.1%.

The official US oil stocks count is released at 1030 ET (1530 GMT) and for last week the EIA crude oil forecast is down 1mln barrels. This week, oil prices sagged after revelations that OPEC supply continues to rise despite last week’s declaration to cull 1.2mln barrels a day.

The US Senate hearing on AT&T-Time Warner deal starts today. The CEOs of AT&T (NYSE:T) and Time Warner (NYSE:T="" rel="5905" t-inc.="">NYSE:TWX) are set to defend their $85bn mega-merger at a congressional hearing scheduled for 1000 ET (1500 GMT).

But whatever the outcome, the CEOs might also eventually face questions from President-elect Donald Trump, who has said the media merger would concentrate "power in the hands of too few."

AT&T shares were unchanged pre-market, at $39.35. Similarly, Time Warner shares were moribund at $93.90.

Following the disarray caused after the weekend by Italy’s decision not to back reform of the Senate investors are waiting to see if the world’s oldest bank -- Monte dei Paschi di Siena -- is going to be able to sort out its own finances or be forced to seek a state bailout.

An announcement could come as early as Wednesday. It could put instability back into banking stocks on Wall Street.

The Italian bank is trying to salvage a rescue plan that would see private investors inject €5bn ($5.4bn) into the bank. A government bailout is the last resort, and cause big losses for shareholders and some bondholders.

Starbucks (NYSE:SBUX) is hosting an event for investors on Wednesday, less than a week after Howard Schultz announced plans to step down as CEO next year.

While the New York event was planned before Schultz's announcement, his departure will likely dominate the day's conversation. Starbucks shares were down 0.6% at $57.10 pre-market.

Among earnings after the Wednesday closing bell will be Costco (NASDAQ:COST), up 0.3% at $151.45 pre-market, H&R Block (NYSE:HRB) and Lululemon (NASDAQ:LULU), up 1.1% at $57.85 pre-market.

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