How the Dow Just Set the U.S. Stock Market up for Another Massive Fall
The Dow Jones Industrial Average rallied more than 315 points on Tuesday, but it may have set the U.S. stock market up for another major sell-off. | Source: Shutterstock
The U.S. stock market rally could be in for a rude awakening Tuesday after a source at the White House confirmed that President Trump was undecided about backing a new budget deal proposed by congressional leaders. The Dow surged by as much as 317 points earlier in the session on reports that a new deal was imminent.
DOW RALLY PREMATURE?
All of Wall Street’s major indexes reported big gains after the open. The Dow Jones Industrial Average surged 287 points, or 1.2%, to 25,340.29. The gains reflected a strong pre-market session for Dow futures as investors pounced on news that a new budget deal was being finalized.
Twenty-eight of 30 index members reported gains through the late-morning, with Caterpillar Inc. (CAT), Merck & Co (MRK) and Intel Corp (INTC) leading the way higher.
The large-cap S&P 500 Index climbed 1.1% to 2,739.39, with ten of 11 primary sectors adding to the rally. Shares of financials and consumer discretionary companies were the biggest gainers percentage-wise. A total of seven sectors rose more than 1%.
The technology-focused Nasdaq Composite Index advanced 1.3% to 7,405.43.
Small-cap stocks were also part of the rally, with the Russell 2000 climbing 0.9% to 1,533.00.
Despite the gain, there was some hesitation on the part of traders that the latest stock market rally was overdone. The CBOE Volatility Index, a fear index that usually trades inversely with the S&P 500, declined only slightly on Tuesday.