The Commerce Department said Tuesday that factory orders fell 2.5% in September from August, much worse than the 0.7% drop analysts predicted. But investors generally expect data from September, and even October, to be extremely weak, as credit markets began to seize up in mid-September. Analysts believe much of the bad news is already factored into stock prices; last week saw the Dow rise 11.3% — its best weekly gain in 34 years.
"The risk of a depression is off the table," said Ben Halliburton, chief investment officer of Tradition Capital Management.
Still, some analysts say the market's gains might not be sustainable. Though the uncertainty surrounding the election will be cleared, they said there are still many economic challenges, and some of the market volatility seen in October, in the weeks and months ahead.
"In the next couple of days, people are going to focus on the fact that we still have these issues," said Bernie McGinn, chief executive of McGinn Investment Management, referring to the worsening economy. "They aren't resolved."
The Dow rose 305.45, or 3.28%, to 9,625.28. The Dow last closed above 9,500 on Oct. 6, when it finished at 9,955.50.
The broader indexes also rose. The Standard & Poor's 500 index gained 39.45, or 4.08%, to 1,005.75. In the past six sessions, the S&P 500 has rallied 18.3%. That includes a 10.8% jump that occurred Oct. 28 after last month's steep sell-off.
The Nasdaq composite index rose 53.79, or 3.12%, to 1,780.12, its sixth straight advance and its longest winning streak of the year.
The Russell 2000 index of smaller companies rose 7.47, or 1.39%, to 545.97.
Advancing issues outnumbered decliners by about 4 to 1 on the New York Stock Exchange, where volume came to a light 1.3 billion shares.
Energy and industrial stocks led the market higher, while health care names, often a defensive investment, showed more modest advances. ExxonMobil rose 4.3%, aluminum producer Alcoa rose 3.5% and Johnson & Johnson advanced 1.19%.
There were other signs of the market's growing confidence. Wall Street's fear gauge, the Chicago Board Options Exchange Volatility Index, known as the VIX, fell to 47.73, its lowest close since Oct. 3. The VIX normally trades below 30 and tracks options activity for the companies that make up the S&P 500; it closed as high as 80.06, on Oct. 27.
As they did Monday, investors have overlooked a spate of bad economic data recently, including the report Monday from the Institute for Supply Management that revealed the worst monthly contraction in manufacturing activity. Additionally, automakers reported the lowest level of U.S. car sales in more than 17 years. The market closed narrowly mixed in light trading Monday, with the Dow making just a single-digit point decline — something that has become unheard of in recent months in the midst of daily several hundred point swings.
"The economic activity in October is obviously very poor," said Halliburton, "and is going to have some very bad numbers reported, and I think that is going to continue in the fourth quarter." As such, investors have begun dipping their toes back in to the market to take advantage of some of the buying opportunities created by the violent swings last month.