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Stocks Close Mixed Following Choppy Trading Day - U.S. Commentary

With traders taking a break following the substantial rally that was seen in the previous session, stocks turned in a lackluster performance during trading on Wednesday.

The major averages bounced back and forth across the unchanged line, eventually ending the session mixed. While the S&P 500 edged down 1.67 points or 0.1 percent to 1,394.28, the Dow rose 16.42 points or 0.1 percent to 13,194.10 and the Nasdaq crept up 0.85 points or less than 0.1 percent to 3,040.73.

The choppy trading on Wall Street came as traders expressed some uncertainty about the outlook for the markets after Tuesday's standout gains lifted the major averages to new multi-year highs.

Traders also seemed reluctant to make any significant moves ahead of the release of some key economic data later in the week, including reports on weekly jobless claims, industrial production, and producer and consumer price inflation.

The lack of direction also came as traders digested the results of the Federal Reserve's stress tests, which showed that 15 of the 19 biggest banks subjected to the tests boasted adequate capital to weather a severe recession.

The results, which were released ahead of schedule, showed that only Citigroup (C), Sun Trust (STI), MetLife (MET) and Ally Financial did not make the grade.

The Fed's stress tests assessed the health of banks under adverse situations such as when the unemployment rate climbs to 13 percent and house prices drop by 21 percent.

Meanwhile, traders largely shrugged off the release of a report from the Labor Department showing that U.S. import and export prices both increased by 0.4 percent in the month of February. The increase in import prices was largely due to a jump in fuel prices.

Among individual stocks, shares of Pacific Sunwear (PSUN) tumbled by 18.7 percent after the apparel retailer reported an unexpected drop in fourth quarter sales and forecast a wider than expected first quarter loss.

On the other hand, Books-A-Million (BAMM) showed a strong upward move after reporting fourth quarter earnings and sales growth. Shares of Books-A-Million jumped 12.1 percent.

Sector News

Despite the lack of direction shown by the broader markets, gold stocks saw substantial weakness on the day. Reflecting the weakness in the gold sector, the NYSE Arca Gold Bugs Index tumbled by 3.9 percent to its worst closing level in well over a year.

The weakness among gold stocks came amid a sharp drop by the price of the precious metal, with gold for April delivery plummeting $51.30 to $1,642.90 an ounce.

Railroad stocks also came under considerable selling pressure on the day, dragging the Dow Jones Railroads Index down by 2.6 percent. Norfolk Southern (NSC) and CSX Corp. (CSX) turned in two of the sector's worst performances.

Significant weakness was also visible among oil service stocks, which moved lower along with the price of crude oil. With crude for April delivery falling $1.28 to $105.43 barrel, the Philadelphia Oil Service Index dropped by 1.7 percent.

Electronic storage, utilities, and tobacco stocks also saw notable weakness, while banking stocks showed a strong move to the upside on the day. The KBW Bank Index ended the day up by 1.3 percent, at an eight-month closing high.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher on Wednesday, although stocks in Hong Kong and mainland China bucked the uptrend. Japan's Nikkei 225 Index surged up by 1.5 percent, while Australia's All Ordinaries Index advanced by 0.9 percent.

Meanwhile, the major European markets turned in a mixed performance on the day. While the U.K.'s FTSE 100 Index edged down by 0.2 percent, the French CAC 40 Index rose by 0.4 percent and the German DAX Index jumped 1.2 percent.

In the bond market, treasuries moved sharply lower, extending the drop seen in the previous session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, surged up by 16.7 basis points to a four-month closing high of 2.274 percent.

Looking Ahead

Economic data is likely to be in focus on Thursday, with traders likely to keep an eye on reports on jobless claims, producer prices, and manufacturing activity in the New York and Philadelphia areas.

by RTTNews Staff Writer

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