Market Update: Wall Street Rallies Again as Dow, S&P 500 Inch Closer to Record Territory

U.S. stocks extended their recovery on Monday, with the major averages more than halving their recent correction losses on broad gains in virtually every sector.

Relief Rally Continues

All of Wall Street’s major indexes finished in positive territory at the start of the week, with the Dow Jones Industrial Average leading the rally. Th blue-chip index gained 399.28 points, or 1.6%, to close at 25,709.27. All but two of the 30 index members recorded gains, with tech giants Cisco (CSCO), Intel and Apple (AAPL) finishing on a strong note.

The broader S&P 500 Index rose 1.2% to 2,779.60, with ten of 11 sectors rallying. Gains were led by telecommunication services, financials and information technology, each of which rose at least 1.5%.

Meanwhile, the tech-driven Nasdaq Composite Index added 1.2% to close at 7,421.46.

The CBOE VIX declined on Monday, albeit at a much smaller rate than one would expect given the huge upsurge in stocks. Wall Street’s preferred measure of investor anxiety closed down 4.2% at 15.80.

Stocks have been in recovery mode for over a week, with the Dow and S&P 500 coming within a few percentage points of record highs set in January.

Despite the recent gain, Goldman Sachs has warned that stocks could dive 25% if the 10-year U.S. Treasury yield hits 4.5% by year’s end. The bank’s base-case scenario predicts the yield will hit 3.25% by the end of 2018, though a “stress test” scenario of 4.5% could be catastrophic for Wall Street.

Economic Data

Investors largely shrugged off disappointing economic data which showed an unexpected drop in new home sales. The highly volatile category of home sales declined 7.8% in January to a seasonally adjusted annual rate of 593,000.

With the decline, sales are at a five-month low. Supply has also risen to its highest level since 2009, a sign that rising mortgage rates were impacting demand.

The Chicago Fed’s National Activity Index also weakened more than expected last month, evidence of an abrupt slowdown in economic growth. The index registered a reading of positive 0.12 in January, down slightly from positive 0.14 the month before.

Reports on durable goods orders and housing prices will headline the economic calendar on Tuesday. On Wednesday, revised GDP data will make the rounds, offering investors the latest glimpse of the health of the U.S. economy.

A report on personal income and outlays, which includes the latest core PCE inflation data, will make headlines on Thursday. On the same day, the Institute for Supply Management (ISM) will report on U.S. manufacturing for the month of February.

Featured image courtesy of Shutterstock. 

Chief Editor to and Contributor to, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi