Wall Street closed higher on Tuesday, driven by materials and discretionary stocks. While consumer confidence was down, investor mood received a boost from a major stimulus announced by China’s government to pull its economy up. All of the three most widely followed indexes closed the session in the green.

How Did the Benchmarks Perform?

The Dow Jones Industrial Average (DJI) gained 83.57 points, or 0.2%, to close at 42,208.22. Nineteen components of the 30-stock index ended in positive territory, while 11 ended in negative.

The tech-heavy Nasdaq Composite rose 100.25 points, or 0.6%, to close at 18,074.52.

The S&P 500 advanced 14.36 points, or 0.3%, to close at 5,732.93. Five of the 11 broad sectors of the benchmark index closed in the green. The Materials Select Sector SPDR (XLB), the Consumer Discretionary Select Sector SPDR (XLY) and the Industrials Select Sector SPDR (XLI) jumped 1.4%, 0.9% and 0.7%, respectively, while the Financials Select Sector SPDR (XLF) slid 0.8%.

The fear-gauge CBOE Volatility Index (VIX) decreased 3.2% to 15.39. A total of 11.4 billion shares were traded on Tuesday, lower than the last 20-session average of 11.6 billion. Advancers outnumbered decliners by a 1.93-to-1 ratio on the NYSE. The S&P 500 recorded 62 new 52-week highs and no new lows, while the Nasdaq Composite posted 103 new highs and 101 new lows.

China Stimulus Dominates Trade Proceedings

On Tuesday, China’s central bank announced its biggest stimulus since the pandemic years to inject life into the economy. For some time now, concern has lingered over a structural slowdown in the country’s economy, which has now been addressed by this much larger-than-expected funding and interest rate cut.

The People's Bank of China (“PBOC”), in its Tuesday stimulus, introduced key initiatives that include plans to bring down the interest rate and reserve requirement ratio. It is on a path to cut a slew of rates in a bid to boost growth. "The reserve requirement ratio will be cut by 0.5 percentage points in the near future," PBOC chief Pan Gongsheng said in Beijing. This is expected to inject around a trillion yuan in the form of "long-term liquidity" into the financial market. Also, the central bank plans to decrease interest rates on existing mortgages and standardize down payment ratios to push up demand in the property sector. The yuan currency jumped to a 16-month high against the dollar.

Cyclical and China-sensitive industries like metal and mining rallied on the announcement and were some of the best-performing stocks on Tuesday.

Consequently, shares of Freeport-McMoRan Inc. FCX and Arcadium Lithium plc ALTM gained 7.9% and 3.2%, respectively. Both currently carry a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Fed Official Continues to be Cautious

For the second time in a matter of days, Fed governor Michelle Bowman warned investors against high expectations with respect to rate cuts. Citing a reason, she said that key measures of inflation remain uncomfortably above the Fed's 2% target.

Economic Data

Per S&P Global data, the Case-Shiller Home Price Index for both 10-city composites and 20-city composites has remained virtually unchanged for July on a monthly basis.

Per a report by the Conference Board, consumer confidence for September came in at 98.7, significantly lower than the consensus of 104. The number for August was revised up to 105.6 from the previously reported 103.3.

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