Here’s What Drove the Dow’s Record

The Dow Jones Industrial Average sets a new intraday high and then another record closing high.

Metals, miners, and solars led Tuesday’s stock market advance after inflation slowed more than expected in China, allowing the government to reduce credit restrictions. Demand for materials is expected to get a boost as China will continue to expand its manufacturing base, with more credit available to the nation’s industrial businesses.

The Dow Jones Industrial Average (NYSEARCA:DIA) reached an intraday high of 14,716 on Tuesday for a new record. The Dow also set another record for its closing high when it finished Tuesday’s session at 14,673.46 for a 59-point gain (0.41 percent).

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The S&P 500 (NYSEARCA:SPY) advanced 0.35 percent to close at 1568.61. The Nasdaq 100 (NASDAQ:QQQ) climbed 0.67 percent to 2804, although the Russell 2000 (NYSEARCA:IWM) declined 0.23 percent to 929.

In other major markets, oil (NYSEARCA:USO) continued to climb back out of its rut on Tuesday, rising 0.45 percent to close at $33.64.

On London’s ICE Futures Europe Exchange, June futures for Brent crude oil advanced by $1.42 (1.36 percent) to $106.19/bbl. (NYSEARCA:BNO, NYSEARCA:USO). June gold futures advanced by $12.10 (0.77 percent) to $1,584.60 per ounce (NYSEARCA:GLD).

Transports got derailed on Tuesday, with the Dow Jones Transportation Index (NYSEARCA:IYT) falling 0.40 percent.

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With the exception of Germany, European stock markets had a positive day, while Japan’s Nikkei 225 Stock Average remained unchanged from Monday’s closing level because the yen failed to weaken. The Shanghai Composite Index (NYSEARCA:FXI) advanced 0.64 percent to 2,225 and Hong Kong’s Hang Seng Index (NYSEARCA:EWH) advanced 0.70 percent to 21,870 as inflation slowed more than expected, allowing the government to reduce credit restrictions.

Technical indicators point to an overbought market with declining momentum near significant long-term resistance lines. The S&P 500 MACD remains below the signal line, suggesting a possible decline. Its Relative Strength Index picked up to 59.09.

For the day, most sectors finished solidly in positive territory, although utilities, consumer discretionary, and consumer staples were moderately in the red.

Consumer Discretionary (NYSEARCA:XLY):  -0.26 percent

Technology (NYSEARCA:XLK):  +0.70 percent

Industrials (NYSEARCA:XLI):  +0.32 percent

Materials (NYSEARCA:XLB):  +1.17 percent

Energy (NYSEARCA:XLE):  +0.85 percent

Financials (NYSEARCA:XLF):  +0.27 percent

Utilities (NYSEARCA:XLU):  -0.30 percent

Health Care (NYSEARCA:XLV):  +0.32 percent

Consumer Staples (NYSEARCA:XLP):  -0.10 percent

Bottom line: Reduced inflation in China is resulting in more available credit for the nation’s manufacturers, increasing demand for materials. As a result, the materials and mining sectors led Tuesday’s stock market advance, along with the Chinese-dominated solar sector, sending the Dow to new record intraday and closing highs.

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John Nyaradi is the author of The ETF Investing Premium Newsletter.

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