Why the Dow Rallied Today


Things looked brighter today as stocks largely traded higher on mounting expectations that the U.S. Federal Reserve will soon initiate actions aimed at bolstering the American recovery. As no clear international driver looks ready to support the global recovery, the Fed seems more and more like the last option to help aid the U.S. economy.

As a result, traders sent the Dow Jones Industrial Average (INDEX: ^DJI) higher, seeing it rise 100 points during the session, or a nearly 0.8% gain. In similar fashion, both the S&P 500 and the Nasdaq rose 0.7% and 0.5%, respectively, during the day. Equally encouraging, the market's oft-cited "fear gauge," the VIX (INDEX: ^VIX) , dropped 4.6% as well.

Around the markets
Several Dow components performed impressively today, starting with telecom giant Verizon Communications (NYS: VZ) , which spiked 2.2% today. Yesterday, the Federal Trade Commission approved the much-watched $3.9 billion spectrum deal that will allow it to deepen its data penetration in the U.S. This fits in nicely with the current storylines in the telecom space, where Verizon shares an effective duopoly with peer AT&T. These companies are the only players large enough to sign high-margin smartphone subscribers in droves and also purchase the spectrum necessary to stream said smartphone data. This contrasts to the other major segment in the telecom industry -- the rural space. The land of the massive dividend, companies such as Windstream (NYS: WIN) and CenturyLink sell legacy services like landline telephony (and broadband, to a lesser extent). In keeping with the broad trends in technology, these companies have seen steady but slow declines in their customer bases as consumers and businesses answer the siren song that is mobile telecom.

On the down side, shares of Intel (NAS: INTC) lost a half a percent today as semiconductor market research firm HIS reduced its overall estimates for semiconductor shipments for the year 2012. Intel, the largest player in this space, will certainly suffer should the industry slow, despite the potential catalyst of Windows 8 driving personal computing upgrade cycles later in the year.

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The article Why the Dow Rallied Today originally appeared on Fool.com.

Andrew Tonner has no positions in the stocks mentioned above. You can follow Andrew and all his writing on Twitter at @Andrew Tonner.The Motley Fool owns shares of Intel. Motley Fool newsletter services have recommended buying shares of Intel. The Motley Fool has a disclosure policy.
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