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Stocks Recover From Early Weakness On Upbeat Housing Data - U.S. Commentary

Stocks have shown a substantial turnaround over the course of the trading day on Monday, recovering from the notable move to the downside seen in early trading. The markets have benefited from the release of some upbeat housing data as well as a pullback by the price of crude oil.

The major averages are currently posting modest gains, with the Dow just above the key 13,000 level. The Dow is up 19.86 points or 0.2 percent at 13,002.82, the Nasdaq is up 5.34 points or 0.2 percent at 2,969.09 and the S&P 500 is up 2.38 points or 0.2 percent at 1,368.12.

While renewed concerns about the financial situation in Europe helped to drag the markets lower in early trading, stocks rebounded following the release of a report from the National Association of Realtors showing a bigger than expected increase in pending home sales.

NAR said its pending home sales index rose 2.0 percent to 97.0 in January from a downwardly revised 95.1 in December. Economists had been expecting to index to increase by about 1.5 percent.

With the bigger than expected increase, the index rose to its highest level since coming in at 111.3 in April of 2010, when buyers were rushing to take advantage of the home buyer tax credit.

A pending sale is one in which a contract was signed but not yet closed. Normally, it takes four to six weeks to close a contracted sale.

The strength that has emerged on Wall Street also comes as the price of crude oil is giving back some ground after surging up to a nine-month high last week. Crude for April delivery is sliding $0.82 to $108.95 a barrel.

Further buying interest may have been generated by news that Germany's lower house of parliament, or Bundestag, voted 496 to 90 in favor of a second Greek bailout package worth 130 billion euros.

The early weakness on Wall Street was partly due to a negative reaction to a statement from the G20 finance ministers and central bank governors.

Following a weekend meeting, the G20 called for a further enhancement of the Eurozone's bailout fund before the rest of the G20 nations can consider increasing their contribution to the International Monetary Fund's resources.

In corporate news, home improvement retailer Lowe's (LOW) reported fourth quarter earnings of $0.26 per share on revenues of $11.6 billion. The results exceeded estimates. The company also updated its 2012 earnings guidance, forecasting earnings of $1.75 to $1.85 per share on 1 to 2 percent sales growth.

Transocean (RIG) reported a fourth quarter loss of $18.62 per share, including items that impacted results by $18.80 per share. Operating revenues rose to $2.42 billion from the year-ago's $2.13 billion.

Sector News

Benefiting from the upbeat pending home sales data, housing stocks have shown a strong move to the upside over the course of the trading day. After falling as much as 1.2 percent in early trading, the Philadelphia Housing Sector Index is up by 1.5 percent.

Hovnanian Enterprises (HOV) has helped to lead the housing sector higher, advancing by 4.6 percent, while Lennar (LEN) and Masco (MAS) are also posting strong gains.

Considerable strength has also emerged among tobacco stocks, as reflected by the 1.2 percent gain being posted by the NYSE Arca Tobacco Index. The gain extends a recent upward move by the index, which has risen to a record intraday high.

While banking, airline, and railroad stocks have also moved to the upside, significant weakness remains visible among biotechnology stocks. The NYSE Arca Biotechnology Index is down by 1.5 percent amid a steep drop by Dendreon (DNDN).

Shares of Dendreon are down by 19 percent even though the biotechnology company reported a fourth quarter profit compared to a year ago loss. The profit was largely due to a $125 million payment associated with the sale of its royalty interest in Victrelis.

Gold, steel, and health insurance stocks also continue to see some weakness on the day, partly offsetting the strength in the aforementioned sectors.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Monday. Japan's Nikkei 225 Index edged down by 0.1 percent, while Hong Kong's Hang Seng Index ended the day down by 0.9 percent.

The major European markets also moved to the downside on the day but closed well off their worst levels. While the French CAC 40 Index fell by 0.7 percent, the U.K.'s FTSE 100 Index and the German DAX Index dipped by 0.3 percent and 0.2 percent, respectively.

In the bond market, treasuries are seeing continued strength despite the turnaround on Wall Street. Subsequently, the yield on benchmark ten-year note, which moves opposite of its price, is down by 5.1 basis points at 1.926 percent.

by RTTNews Staff Writer

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