The Dow Jones roared over 100 points on Monday. Here are the five biggest catalysts behind the stock market surge.
The Dow Jones rose over 100 points on Monday as a “Santa Claus” rally helped lift the index towards new record highs.
With Christmas two days away, many Wall Street traders aren’t at their desks, but that doesn’t mean there isn’t plenty of action in the stock market.
Here are five reasons the Dow rallied today:
As the most heavily weighted stock in the Dow 30, the performance of Boeing (NYSE: BA) stock is always vital. Today saw a massive 2.6% bump in the aerospace giant, as Boeing finally moved on from its embattled CEO, Dennis Muilenberg, whose resignation was announced today.
It has been a year of crisis management for Muilenberg, and bulls seem to believe his departure is good news for the company.
Up just 4% YTD, BA stock has underperformed the Dow Jones by a whopping 18%, leaving plenty of upside should any of the regulatory storm clouds surrounding its grounded 737 MAX jet ever clear.
China’s government also gave risk appetite a boost by announcing it would cut import tariffs on hundreds of products with all its trading partners.
Such concessions increase the potential for a meaningful agreement being signed between the US and China in 2020, and the news was viewed as a positive for stocks to start the week.
Easing trade war tensions have provided a substantial lift to the Dow and broader stock market over the past several months. A “phase one deal” between the US and China is expected to be signed in January.
Following strong challenges from Elizabeth Warren and other Democratic candidates, Joe Biden seems to have regained his footing in the weeks leading up to the Iowa caucuses. That’s good news for the Dow because Biden is clearly the most stock market-friendly candidate in the Democratic field.
In a detailed report on the 2020 election from ING, economist James Knightley said that Trump not being convicted in the Senate is actually the preferred outcome for the former vice president.
This outcome is favorable for Centrist Democrats because the Democratic primary contests will be dominated by the need to replace President Trump with the most electable candidate. As the Centrist Democratic candidates have positioned themselves along those lines, this result strengthens them significantly.
In keeping with a recent trend, Wall Street ignored some dodgy macro data on Monday.
The Dow Jones has not paid much attention to any economic data that does not pertain to jobs or consumer appetite, and this was the case to start the week as durable goods missed and new home sales fell short of estimates.
Neither of these is a top-tier release, but they both highlight a troubling trend that could come back to haunt Dow bulls.
There was little fear of this today, though. Investors are clearly optimistic that this has been a bumper holiday period for retailers.
When the Dow 30 trades close to record highs, it often appears to be an excellent time for traders to short the index. While this can be true, in most cases, this is when Wall Street bulls make their most aggressive long trades.
The reasoning for this is that there is no longer any historical precedent for where the rally might end. Until resistance forms on the charts, investors will often push the envelope and see how high the Dow Jones can fly in open sky.
Pure momentum can be harder to fight than economic reality. In the near term, it looks like the only place the Dow wants to go is up.
Last modified: September 23, 2020 1:25 PM