Why the Dow Is Skyrocketing
Markets are soaring a day after Spain announced that it was effectively shut out of capital markets, despite European Central Bank President Mario Draghi indicating that additional monetary policy was not forthcoming. A more tightly integrated banking union between the eurozone members is in the works, but nothing would take effect before 2014, arriving just in time to pick up the pieces from a fiscal crisis. It's years late and a few drachma short, it seems. Still, beaten-down companies at the heart of the crisis like indebted Greek shipper DryShips (NAS: DRYS) and Spanish financial institution Banco Santandar (NYS: STD) are seeing healthy 3% gains.
If anything, today's optimism is pre-empting Federal Reserve Chairman Ben Bernanke's appearance tomorrow before Congress. With the hopes of sustained recovery dimming, a new round of quantitative easing or extending Operation Twist may be in the works.
Let's take a closer look at the three major indexes and drill down on a few stocks soaring above the rest of the market.
Dow Jones Industrial Average (INDEX: ^DJI)
Source: Yahoo! Finance.
All three major indexes are up nearly 2% as of this writing, and the Nasdaq's first-place performance isn't surprising, as the tech sector's 2.5% gain leads the rest of the market. All 30 Dow components are green as the index is back in positive territory for the year, with Bank of America's (NYS: BAC) 6% increase leading the charge today. Additional federal reserve action would directly benefit the too-big-to-fail Wall Street firms the most, as would a rate cut in Europe, an idea that made it into recent ECB discussions before getting shot down by central bankers.
Unsurprisingly, the Direxion Daily Financial Bull 3X Shares (NYS: FAS) ETF is up 6.5%.That said, determining if today's gain is a change in sentiment or simply short covering before a potentially big announcement from Bernanke remains to be seen.
In the meantime, I urge you to download our newest special free report: "These Stocks Could Skyrocket After the 2012 Presidential Election." Each candidate has their own plan for getting America back on track, and The Motley Fool will have you prepared to profit -- no matter who wins! Download your copy now, for FREE, and discover unique ways to profit from the election -- if you buy the right stocks before the next president's term begins.
At the time this article was published David Williamsonholds no position in any company mentioned.Click hereto see his holdings and a short bio. The Motley Fool owns shares of Bank of America. The Motley Fool has adisclosure policy. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.
Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.