Dow Rises 800 Points In Historic 2-Day Stretch

Topline

Stocks continued to rally Tuesday following one of their best trading days of 2022, as the market shakes off its worst fears that sent the market tumbling in September—though some warn the rally will be short-lived.

Traders work on the floor of the New York Stock Exchange during afternoon trading on Monday.

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Key Facts

The Dow Jones Industrial Average rose 2.8% on Tuesday, or 826 points, and is up 5.4% on the week after a 760-point spike Monday.

That’s the first time the Dow has jumped more than 700 points in consecutive days in the index’s 137-year history.

The S&P 500 rose 3.1% and the tech-heavy Nasdaq jumped 3.3%, building on their respective 2.6% and 2.3% gains Monday.

Gains were broad, with all sectors on the S&P jumping at least 1.4%.

Driving this week’s gains are investors’ increasing cautious optimism about monetary policy globally.

The market welcomed the Australian central bank’s Tuesday announcement it would raise interest rates by 25 basis points as opposed to the projected 50 basis point hike, and 10-year U.S. Treasury yields fell a further two basis points Tuesday to their lowest level in two weeks.

Contra

Despite the recent rally thanks to hope about the Federal Reserve backing off its most aggressive interest rate hike plans, no steps from the Fed can save the market from the “freight train of the oncoming earnings recession” as corporate profits respond to the downturn, Michael J. Wilson, Morgan Stanley’s chief investment officer, wrote in a Sunday note to clients.

Key Background

The Dow, S&P and Nasdaq each fell about 10% in September as the market reacted to persistent inflation data, pricing in more hawkish rate hikes from the Fed. The last three months of the year are typically a strong period for stocks, with the S&P rising about 5% during the quarter on average.

Big Number

22.3%. That’s how much Twitter shares rose Tuesday after the world’s wealthiest man, Elon Musk, said he planned to honor his agreement to buy the social media company. The company’s share price closed at $52, just short of the $54.20 that Musk has offered to pay to buy out Twitter. Shares of Tesla, which is led by Musk as his primary day job, rose 2.9% to $249.44 Tuesday after a dramatic 9% fall Monday, though it gave back some of its morning gains following the Twitter news.

Tangent

Bitcoin rose 3% Tuesday to $20,239, its first time over $20,000 in three weeks.