Stocks Snap Their Losing Streak -- Why the Dow Rallied Today

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U.S. stock shrugged off their recent bout of pessimism today, posting their first day of gains so far this week.  On the day, the Dow Jones Industrial Average (INDEX: ^DJI  ) rose 72 points, to gain 0.5%. In similar fashion, the S&P 500 and Nasdaq each also rose 1.0% and 1.4%, respectively. 

Today’s driving forces
Europe played a major role in today’s bullishness.  In Spain, the government unveiled its 2013 budget, which included substantial budget reductions and reforms.  The Spanish government hopes the measures will adequately persuade markets that their fiscal reforms are indeed taking root. The announcement helped ease skittish investors, and drove the market’s "fear gauge," the VIX (INDEX: ^VIX  ) , down a monstrous 8.8% on the day.  However, this was only one storyline that fueled the rise in stocks on the day.

The second storyline came on the other side of the planet, as China’s central bank took measures to inject increased liquidity into its banking system. The overall amount, which totaled $57.9 billion, right ahead of the weeklong National Day festival, should help Chinese banks stay highly liquid, even as demand for cash increases.  Investors cheered the event, as general sentiment has grown increasingly skeptical over the last six months.  And, despite these big picture stories, individual stocks offered some of the most compelling storylines of the day.

Around the markets
One of the day’s most widely covered storylines came out from Tempur-Pedic International (NYSE: TPX  ) , whose shares rose a whopping 14.4%, as it announced it would acquire rival bed manufacturer Sealy (NYSE: ZZ  ) in a deal nearly $1.3 billion in value.  Despite today’s spike, Tempur-Pedic’s shares still are still down over the past12 months.

Today's most impressive news on the earnings front actually occurred after the market’s close.  Struggling Canadian smartphone maker Research In Motion (Nasdaq: RIMM  ) spiked as much as 19% in after-hours trading as it posted a narrower loss than analysts had forecast.  This week, RIMM also demoed its latest version of its long-overdue BlackBerry 10 operating system. 

All this begs the question, is this the start of an authentic turnaround at RIMM?  My money’s on no; but, with a stock as volatile as RIMM’s, taking such a risk could burn investors terribly.  Investors will do better over the long-term to focus on tried and true performers, like some of the Dow’s dividend dynamos.  We highlight three special best-in-class Dow stocks in our new research report, which you can pick up today.  Just click here to get started.

Fool Andrew Tonner held no financial position in any of the companies mentioned in this article.  Fool me on Twitter at @Andrew Tonner.

The Motley Fool owns shares of Tempur-Pedic International. The Motley Fool has a disclosure policy. We Fools may not 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.

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Today's Market

updated Moments ago Sponsored by:
DOW 18,146.66 -15.69 -0.09%
S&P 500 2,141.38 0.04 0.00%
NASD 5,252.38 10.55 0.20%

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Related Tickers

10/21/2016 2:36 PM
^DJI $18146.57 Down -15.78 -0.09%
^VIX $13.45 Down -0.30 -2.18%
Volatility S&P 500 CAPS Rating: No stars
BBRY $7.42 Down -0.06 -0.80%
BlackBerry CAPS Rating: *
TPX $51.36 Down -1.04 -1.98%
Tempur Sealy Inter… CAPS Rating: ****
ZZ.DL $0.00 Down +0.00 +0.00%
Sealy Corporation CAPS Rating: No stars