How the Dow Rallied for a 3rd Straight Day

Three straight gains gives investors a streak to be proud of -- a winning one, strangely enough. Given how abysmally May treated investors, this probably seemed like an impossibility, but the Dow Jones Industrial Average (INDEX: ^DJI  ) gained another 0.4%, leaving it above water for two consecutive days. The same couldn't be said for the other two major U.S. stock indexes. Both the S&P 500 and Nasdaq both closed in negative territory, down 0.01% and 0.5%, respectively.

Encouraging policy on several fronts helped to lift the Dow today. The People's Bank of China lowered its primary benchmark interest rate as news of slowing growth in the world's second largest economy has added to the increasingly dour global growth outlook. Today's action marks the first time since 2008 the Chinese central bank has lowered interest rates.

In similarly bullish news, Federal Reserve Chairman Ben Bernanke signaled that the Fed would indeed take necessary steps to support the tepid American recovery if the European debt crisis crossed the pond. While certainly encouraging, it did shortchange those investors who hoped Uncle Ben would provide stronger hints about taking proactive measures to further the economy (read: QE3). However both items did ease tension in the markets. On the day, the market's "fear gauge," or the VIX (INDEX: ^VIX  ) , retreated 2%.

Reading the tea leaves
While the past several days have helped buoy investors' spirits, the three main threats to the market still loom large. The picture in Europe, specifically Greece, should become more apparent as the month progresses. Don't forget, though, that despite today's positive news, the markets remain very risky at present.

The solution? Patience.

Investors should be in no hurry to dive in head-first today. Rather, investors should use calm periods such as this week to find and research stocks they love and want to invest in for the long term. In a risky environment, cheap, large-cap stocks with strong histories of rewarding shareholders are great places to look; stocks like McDonald's (NYSE: MCD  ) and Intel (Nasdaq: INTC  ) would make for great places to start your search. The Fool recently issued a research report detailing exactly these kinds of dividend stalwart stocks that could weather a downturn should today's situation deteriorate further. If you'd like to find out more about these dividend powerhouse stocks, grab your copy today.

Andrew Tonner held no financial position in any of the companies mentioned in this article. You can follow Andrew and all his writing on Twitter at @AndrewTonner. Motley Fool newsletter services have recommended buying shares of Intel and McDonald's. The Motley Fool has a disclosure policy. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


Read/Post Comments (0) | Recommend This Article (10)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

DocumentId: 1906686, ~/Articles/ArticleHandler.aspx, 7/25/2014 11:40:09 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement