Dow jumps 150 points to record, rallies for a second day to start fourth quarter

The Dow Jones Industrial Average hit a record high on Tuesday as it rallied for a second day, boosted by gains in Intel and optimism around global trade.

The 30-stock index traded 151 points higher as Intel climbed more than 4 percent. Boeing shares also hit a record to lift the Dow. The Dow also posted strong gains in the previous session, which was the first of the fourth quarter.

The S&P 500 gained 0.2 percent while the Nasdaq Composite hovered around the flatline. Chipmaker Micron followed Intel higher, rising 1.6 percent.

Stocks are coming off strong gains from the previous session after Canada joined the U.S. and Mexico in a new trade deal.

The United States-Mexico-Canada Agreement, or “USMCA” for short, will see all three countries compromise on certain trade aspects. More market access will be granted to U.S. dairy farmers, while Canada has agreed to effectively cap automobile exports to the States.

“The market reaction suggests investors are less worried about a trade war,” said Jennifer Ellison, principal at BOS. “it’s more of a sigh of relief.”

Boeing climbed 1.4 percent, while Caterpillar gained nearly 2 percent. The two stocks are seen as bellwethers for trade given their exposure overseas.

Now investors will be looking to China, to see if Beijing and Washington can compromiseon certain trade elements.

Spencer Platt | Getty Images News | Getty Images

Earlier, the major averages turned slightly lower amid pressure from bank shares. Goldman Sachs and Morgan Stanley fell 0.6 percent and 0.9 percent, respectively. Citigroup and Bank of America both dropped more than 1 percent.

U.S. banks followed Treasury yields and their European counterparts lower. The 10-year yield fell to 3.069 percent while the Stoxx Europe 600 Banks index fell 1.2 percent. European banks pulled back amid renewed concerns stemming from Italy’s budget.

Luigi Di Maio, the head of the Five Star Movement in Italy, defended the country’s 2.4 percent deficit target for 2019. Di Maio accused European Union officials of deliberately upsetting capital markets through negative comments about the budget. “Some European institutions are playing … at creating terrorism on the markets,” Di Maio said.

“While Italy’s budget plan is below France and less than the 3% threshold that triggers concern, … the worry is the lack of any cushion along with their massive debt pile and little economic growth,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group.

“But maybe the biggest risk is the negative feedback loop that is the Italian banking system that owns many billions of Italian bonds,” Boockvar said.

On top of that, Claudio Borghi, a euroskeptic economist who chairs the budget committee of the lower house of Italy’s parliament, said in a radio interview Tuesday that he was “truly convinced” most of the country’s problems would be solved if it had its own currency.

Amazon shares was flat after the company announced it would raise its minimum wage to $15 per hour for all U.S. employees.

—CNBC’s Sam Meredith contributed to this report.

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