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 (NYS: MCD) and Intel (NAS: 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.
At the time this article was published Andrew Tonnerheld no financial position in any of the companies mentioned in this article. You can followAndrewand all his writing on Twitter at@AndrewTonner.Motley Fool newsletter serviceshave recommended buying shares of Intel and McDonald's. The Motley Fool has adisclosure policy. We Fools don't 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.