Adam Shell, USA TODAY
NEW YORK (USA TODAY) - How do you spell "relief" on Wall Street? No bombs in Syria. Belief in a light bond-buying taper by the Federal Reserve. And strong economic data from around the globe.
Then add up the good news, subtract the fear factor, and what you get is a so-called "triple-triple" for the Dow, which has put together a string of three trading sessions of triple-digit point gains in a row for the first time since late June.
Remember how fear was so high in August and stock market selling so intense that the Dow Jones industrial average fell 5.6% from its Aug. 2 record closing high?
Escalating the worries back then: a potential military confrontation with Syria about its use of chemical weapons on civilians, fear of the Federal Reserve turning less market-friendly and pulling back on its bond-purchase stimulus too quickly and angst about whether China's economy, the world's growth engine the past few years, was at risk of slowing too rapidly after years in the express lane.
Well, those fears have eased. In a big way.
President Obama has put a U.S. missile strike to punish Syria on hold and is giving diplomacy a chance. After a weak August jobs number, Wall Street expects the Fed to dial back its bond-buying slowly, or what it dubs "Taper Lite."
And China's economy is showing signs of resurgence, thanks to recent trade data that showed a bigger-than-expected bump in exports and a reading on manufacturing that inched the economy back into expansion territory.
The three-day rally so far this week adds up to 404 points, or 2.7%, to 15,326.60. The Dow has never had four-straight days of 100-plus point gains, according to S&P Dow Jones Indices, citing FactSet data.
"The rally has been driven by a combination of better economic data and relief related to the geopolitical scare," says Rod Smyth, chief investment strategist at RiverFront Investment Group, adding that the economies of Europe and Japan are also experiencing modest business expansions.
If Syria agrees to turn over its chemical weapons stockpile, as it says it will, the likelihood of a military confrontation with the United States is reduced, says Ed Yardeni, chief investment strategist at Yardeni Research. That is bullish because it reduces uncertainty, he says, and has the more practical result of driving crude oil prices back down.
Regarding the Fed, which could start dialing back on its $85-billion-per-month bond-buying program at its next policy meeting set for Sept. 17-18, Wall Street seems to have come to grips with the notion that the Fed will reduce its asset purchases by no more than $15 billion a month, or perhaps as little as $10 billion, which would be considered "Taper Lite," says Smyth.
'If the Fed sends the signal that they're going to taper, but they're going to do it gently," it will be a market positive, says Smyth. "It's all about the magnitude."
But tapering fears, which have been "placed on the back burner" amid war talk, could return quickly if the Syria story remains calm, warns Todd Schoenberger, managing partner at LandColt Capital. "Enjoy the rally as long as it lasts," he says, "because a chaotic market may be returning next week."