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Here’s What Drove the Dow’s Stunning 350-Point Rally Today

Last Updated September 23, 2020 2:02 PM
Francois Aure
Last Updated September 23, 2020 2:02 PM
  • The Dow Jones rallied nearly 350 points on Monday.
  • Positive economic data in the U.S. and Europe helped spur risk appetite.
  • Unfortunately for Dow bulls, today’s ISM data might be less optimistic than it appears on the surface.

The Dow Jones enjoyed a tremendous start to the week as risk-on appetite engulfed Wall Street. Strong economic data put the bulls in the driver’s seat.

While signs of recovery are growing increasingly pronounced throughout the world economy, are investors exaggerating what the statistics mean?

Dow Jones Booms as Global Economy Shows More Signs of Life

All three major U.S. stock market indices soared on Monday, though neither the Dow nor the S&P 500 could match the Nasdaq as it rocketed to another all-time high.

Dow Jones, stock market, U.S.
The Dow Jones surged on Monday as Wall Street momentum continued to rise. | Source: Yahoo Finance 

Here’s where they stood at 3:03 pm ET:

  • The Dow had rallied 327.38 points or 1.27% to 26,154.74.
  • The S&P 500 had jumped 1.18% to 3,166.96.
  • The Nasdaq had surged 1.75% to 10,386.08.

The economy needs all its pistons firing to put a global recession in the rearview mirror. Recent evidence suggests the world’s three major economic powers – the United States, the European Union, and China – are all emerging from the pandemic slump.

Chinese factory data  has consistently pointed to resilient demand, while today’s eurozone retail sales reading indicates  that European consumers are emerging from the woodwork.

In the United States, labor market data has bolstered sentiment. Monday’s ISM non-manufacturing figure injected even more optimism into data-driven investing forecasts.

ING: ISM Data May Not Be as Strong as It Looks

ISM non-manufacturing
ISM data paints a seemingly impressive rebound, but economists say it’s not that simple. | Source: Think ING 

Unfortunately, the U.S. data may not be quite as rosy as it seems. ING economist James Knightley outlined his reservations in a report this morning.

A sharp rebound in the ISM business surveys is another positive development, but remember the series don’t tell us anything about magnitude. All we can fairly say is that a majority of companies are now experiencing an expansion after a torrid few months. The employment components do remain a worry though…

When the baseline number gets terrible enough – as ISM sentiment did during the economic lockdown – the bounces look exaggerated from a statistical point of view.

Although this creates a layer of uncertainty for economists, it doesn’t seem to matter in a stock market where bulls manage to find the silver lining in every story.

Dow 30: Tech Shines as Apple Soars; Rising Yields Lift Financials

On a bright day for the Dow 30, $1.6 trillion heavyweight Apple raced to a 52-week high. AAPL jumped more than 2.4% as the tech sector boomed, lifting the Nasdaq to an all-time high of its own.

Apple has replaced Boeing as the Dow’s most heavily weighted stock, so the news that it had ramped up its iPhone manufacturing plans  exerted an outsized effect on the DJIA.

Last week’s negative headline – that the tech giant had shuttered a number of its retail stores due to the reemergence of the pandemic  – seems to be mostly forgotten.

Goldman Sachs was the top-performing stock in the index, roaring 4.7% higher while Treasury yields rose . Fellow bank stock JPMorgan Chase managed a less impressive 2% gain.

The only DJIA component meaningfully in the red was Walmart, which lost around 0.6% as the grocery and retail giant gave way to higher growth investments. Home Depot, Pfizer, and Intel flirted with minor declines.