Markets started the New Year on a strong note, posting fresh records on multiple occasions. Newly instituted tax cuts had a beneficial impact on stocks with the Dow breaching the 25,000 and 26,000 mark in the same month. Economic data remained strong even as fourth-quarter earnings promised to be the most bullish in recent times. Meanwhile, the Fed refrained from raising rates but indicated that a hike was more or less certain in March.

January’s Performance

For the month of January, the Dow, the S&P 500 and the Nasdaq increased 5.8%, 5.6% and 7.4%, respectively. The passage of the Tax Cuts and Jobs Act of 2017, which permanently slashed corporate tax rates from 35% to 21%, last December contributed to January’s gains. Additionally, in its Beige Book, the Fed provided an encouraging outlook about the U.S. economy, which in turn also boosted investor sentiment.

Moreover, during the month, the Senate gave its consent to pass a short-term spending bill that ends the recent government shutdown. Additionally, an upbeat fourth-quarter earnings season, which includes a very strong revenue momentum, an above-average proportion of positive surprises and an unusually positive revisions trend for the current and coming quarters, also contributed to strong market performance.

Benchmarks Breach Multiple Records

Key indexes achieved multiple milestones over last month. On Jan 2, the Nasdaq closed above the 7,000 mark for the first time. On the very next trading day, the S&P 500 moved past 2,700 for the first time. Optimism over strong market performance in 2018 contributed to these gains.

On Jan 4, the Dow touched the psychological level of 25,000 for the first time. This was the blue-chip index’s fastest 1,000-point rise since its inception in May 1896. On Jan 9, the S&P 500 gained 3.6 points to close at a record for the sixth straight session. This marks its best start to a year since 1987.

On Jan 17, the Dow finished above 26,000 for the first time. Additionally, both the Dow and S&P 500 posted their best 11-trading day start for the first time in a year since 1987, following which bond yields and the U.S. dollar increased. Benchmarks hit record levels again on Jan 22, after the Senate gave its consent to the bill.

Finally, on Jan 26, all three U.S. benchmarks closed at record levels following better-than-expected earnings. The S&P 500 finished at a record level for 14 trading days, its best such feat in a month since June 1955. The index also posted its best one-day rise since Mar 1, 2017. Additionally, the Dow posted a rise of more than 220 points, while the Nasdaq registered its biggest one-day gain since Jan 2.

Bullish Domestic Data

Economic data released during November was largely encouraging in nature. The ISM manufacturing index rose to 59.7% in December and reached its highest settlement in the last two years. Construction increased 0.8% from downwardly revised October figure to its highest level on record. Factory orders surged 1.3% during the month of November. CPI and core-CPI gained 0.1% and 0.3%, respectively, in December.