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What's Behind the Dow's 400-Point, 3-Day Rally

By John Divine - Sep 11, 2013 at 7:26PM

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One stock’s great showing Wednesday keeps the Dow roaring higher.

Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.

The Dow Jones Industrial Average (^DJI 1.27%) is having a pretty phenomenal week so far. With today's closing bell, the index boasts a more than 400-point gain in its last three sessions alone. The recent fit of euphoria on Wall Street is being driven by upbeat Chinese economic data, simmering tensions in Syria, and speculation over the Federal Reserve's upcoming policy meeting. After today's 135-point -- or 0.9% -- jump, the Dow sits at 15,326, having added 19% already in 2013. 

Wednesday's blue-chip gains were heavily driven by the performance of International Business Machines (IBM 1.11%), which surged 2.2% today. When IBM stock rallies, the Dow often follows suit -- if only because IBM is the Dow's heaviest-weighted component, accounting for more than 9% of the 30-stock index. Shareholders applauded Big Blue's $505 million deal today with Synnex, in which IBM disposes of its customer-care outsourcing business in exchange for cash and a small equity stake in the $2 billion Synnex. 

Alcoa (AA), which was one of Tuesday's few Dow decliners, posted 1.7% gains on  Wednesday. In stark contrast to IBM, Alcoa stock has the least amount of sway in the price-weighted average, which is a big reason it's losing its spot in the Dow later this month. The aluminum giant advanced today as it fights the London Metal Exchange's proposed rule changes that attempt to cut the delivery time of the metal from warehouses, a policy that could put pressure on aluminum prices. 

The specter of higher interest rates hit JPMorgan Chase (JPM 1.66%) today, as the stock fell 0.8%. Although higher rates will mean more lending income for the financial industry, banks with major bond portfolios and refinancing segments will feel the pain. Today's Mortgage Bankers Association release, for instance, shows a 71% drop in its Refinance Index in roughly four months. 

Lastly, Intel (INTC 1.46%) shares dropped 0.8% as the tech sector stumbled. Despite earnest efforts to diversify out of the PC market -- highlighted in the company's annual developer forum this week -- its current business is still PC-heavy. New research from IDC suggests that the fourth quarter could be the first on record to boast higher tablet shipments than PC shipments, which means a lot is riding on the success of Intel's new focus on data centers, mobile devices, and wearable tech. 

Fool contributor John Divine has no position in any stocks mentioned. You can follow him on Twitter @divinebizkid and on Motley Fool CAPS @TMFDivine.

The Motley Fool recommends and owns shares of Intel. It owns shares of International Business Machines and JPMorgan Chase. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
$33,761.05 (1.27%) $424.38
International Business Machines Corporation Stock Quote
International Business Machines Corporation
$134.01 (1.11%) $1.47
Intel Corporation Stock Quote
Intel Corporation
$36.11 (1.46%) $0.52
JPMorgan Chase & Co. Stock Quote
JPMorgan Chase & Co.
$122.13 (1.66%) $1.99
Alcoa Inc. Stock Quote
Alcoa Inc.

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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