the dow industrials climbed to a record and bond yields rose around the world for a second day, as investors applauded the prospects of expansive fiscal spending under a trump administration. the rise of 218 points in the dow jones industrial average, to 18807.88, puts the 30-stock index up 7.9% for the year. the dow has risen 2.7% since its close tuesday, reflecting a bet that republican control of the white house and congress would enable passage of a fiscal stimulus plan, tax cuts and a regulatory rollback . selling intensified in the bond market, with the 10-year treasury note<u+2019>s yield rising for the fourth straight day to 2.118%, up 0.251 percentage point since markets closed tuesday. yields, which move opposite to price, rose again around the globe, with the yield on the 10-year german bund hitting 0.275%, its highest level since may, according to tradeweb. yet some believe a reckoning could await, reflecting unease over volatile stock and bond markets, tepid economic fundamentals and uncertainty over what policies will actually move forward in coming months. <u+201c>it seems to me the market is focusing for now primarily on the good things that can come economically from stimulus,<u+201d> said tony rodriguez, co-head of fixed income at nuveen asset management llc. in doing so, investors are <u+201c>ignoring some potentially growth-impairing policies,<u+201d> mr. rodriguez said, such as the controls on immigration and free trade that mr. trump mentioned repeatedly during the campaign. lower immigration and tariffs reduce population growth and productivity, two key inputs to economic performance. unlike tax cuts or spending bills that must go through congress, mr. trump can do more unilaterally to carry out his promises to crack down on what he has said are unfair trade practices. <u+201c>if your takeaway from the election was that blue-collar, working-class people launched him into the presidency, i don<u+2019>t know how you would conclude we<u+2019>re going to cut the corporate tax rate and not do the protectionist [trade] agenda he<u+2019>s talked so much about,<u+201d> said andy laperriere, a policy strategist at research firm cornerstone macro. since bond yields hit lows in july, many investors have been anticipating an increase in long-term interest rates accompanying a modest pickup in inflation. investors have doubled down this week on the <u+201c>reflation trade,<u+201d> snapping up assets that tend to perform well during times of rising growth and inflation, such as industrial stocks, copper and inflation-protected bonds, and selling dividend stocks and traditional bonds. the trade, now accelerated in part by mr. trump<u+2019>s promises to boost the economy through stimulus and tax cuts, has paid dividends so far. copper prices have risen 14 straight days, gaining 22%, including a 3.7% gain thursday. the president-elect has said he would boost infrastructure spending, which could lift demand for metals used for building and manufacturing. stimulus works by boosting spending, which leads to new investment and hiring, which prompts further spending. mr. trump has been more specific on tax cuts than he has on spending, where he has sketched out relatively few details that have at times appeared to contradict each other. rules would allow republicans to use procedures to pass a tax bill with a simple majority in the senate, avoiding a 60-vote threshold needed to cut off debate. but using those rules could also require some policy trade-offs, as happened when some of george w. bush<u+2019>s tax cuts from 2001 and 2003 never became permanent. in addition to infrastructure spending, mr. trump has promised big increases in defense, border security and veterans health care. on infrastructure, his calls for $1 trillion in new spending assume little new public investment. instead, they would provide $137 billion in tax incentives for construction companies looking to build new revenue-generating toll roads or bridges, which would lead to even larger private investment. <u+201c>we are just beginning a transition,<u+201d> said paresh upadhyaya, director of currency strategy at pioneer investments. <u+201c>until we know what the new administration<u+2019>s priorities are going to be, the market is just guessing.<u+201d> while republicans in congress have broadly embraced calls for lower taxes, their support for more spending is mixed. some lawmakers have called for more military funding, but republicans struggled to pass a budget this year because of internal disagreements over how aggressively to cut other spending. house speaker paul ryan (r., wis.) said in september that he didn<u+2019>t support a big increase in public spending on infrastructure because congress finished work last year on a five-year funding bill. the upshot is that mr. trump<u+2019>s promises will test congressional republicans<u+2019> commitment, frequently voiced during the obama years, to rein in deficits, which increased this year after several years of declines. mr. trump<u+2019>s advisers have said their policies will pay for themselves by boosting economic growth. another potential flashpoint for investors: the federal borrowing limit, which has been suspended until march 2017, will likely also need to be raised by next summer. republicans in recent years have been loath to raise the debt ceiling, relying heavily on democratic votes to do so. many believe the immediate scope for further bond-price declines are likely limited as yields approach 2.25%, the level at which they closed 2015, reasoning that portfolio managers seeking to invest for long periods will find those yields attractive and return to the market. the rise this week in bond yields <u+201c>has priced in a lot of potential positive economic outcomes,<u+201d> said mr. rodriguez of nuveen. others question the breadth of the economic expansion investors seem to be anticipating. crude prices on the new york mercantile exchange are up 2% this week but remain 13% below their settlement high for the year hit on oct. 19. <u+201c>if we are going to get reflation, i would have thought that would be helpful for the price of crude,<u+201d> said james bianco, president of bianco research llc. <u+201c>but the price of crude seems to be struggling to get out of its own way.<u+201d> write to aaron kuriloff at aaron.kuriloff@wsj.com , nick timiraos at nick.timiraos@wsj.com and colin barr at colin.barr@wsj.com
dow climbs to a record  - wsj
aaron kuriloff nick timiraos