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Stocks Rise Sharply On Upbeat Earnings, Europe News - U.S. Commentary

With traders reacting positively to news out of Europe as well as the latest batch of quarterly results, stocks moved sharply higher during trading on Tuesday. The markets largely shrugged off some disappointing U.S. economic data.

The major averages moved roughly sideways going into the close, ending the session near their best levels of the day. The Dow jumped 194.13 points or 1.5 percent to 13,115.54, the Nasdaq soared 54.42 points or 1.8 percent to 3,042.82 and the S&P 500 surged up 21.21 points or 1.6 percent to 1,390.78.

The rally on Wall Street, which came after stocks ended the previous session mixed, was partly due to news of a successful Spanish debt auction.

Spain sold 3.2 billion euros worth of twelve and eighteen-month bills, above the target of 3 billion euros. While the yields were well above last month, the auctions attracted improved demand.

The results of the bond auctions contributed to a drop in Spanish bond yields and offset some of the recently renewed concerns about the European debt crisis.

Upbeat earnings news also generated some positive sentiment, with shares of Coca-Cola (KO) rising by 2.1 percent after the beverage giant reported better than expected first quarter earnings.

Coca-Cola reported first quarter earnings that rose to $0.89 per share from $0.82 per share in the same quarter a year ago, coming in above analyst estimates for $0.87 per share. The company benefited from a 5 percent increase in the volume of drinks sold.

Goldman Sachs (GS) also reported better than expected first quarter earnings and announced an increase in its quarterly dividend to $0.46 per share.

While Johnson & Johnson (JNJ) also reported stronger than expected earnings growth, the healthcare giant reported a modest drop in sales.

Meanwhile, trades largely shrugged off some disappointing U.S. economic data, including a Commerce Department report showing an unexpected drop in housing starts in the month of March.

The report showed that housing starts fell 5.8 percent to an annual rate of 654,000 in March from the revised February estimate of 694,000. Economists had expected starts to rise to an annual rate of 700,000.

At the same time, the Commerce Department said building permits rose 4.5 percent to an annual rate of 747,000 in March from the revised February rate of 715,000. With the increase, building permits rose to their highest level since September of 2008.

A separate report from the Federal Reserve showed that industrial production unexpectedly came in unchanged for the second consecutive month in March.

Sector News

Reflecting broad based buying interest, most of the major sectors showed strong moves to the upside on the day. Healthcare provider stocks posted particularly strong gains, resulting in a 3.1 percent jump by the Morgan Stanley Healthcare Provider Index.

Sunrise Senior Living (SRZ) helped to lead the healthcare provider sector higher, with the senior living services provider surging up by 10.3 percent. The gain by Sunrise came on the heels of news that the company will receive $28 million for the sale of its interest in sixteen communities to Ventas (VTR).

Considerable strength was also visible among networking stocks, as reflected by the 2.4 percent gain posted by the NYSE Arca Networking Index. Acme Packet (APKT) and Juniper Networks (JNPR) turned in two of the networking sector's best performances.

Banking stocks also showed a strong move to the upside over the course of the trading day, driving the KBW Bank Index up by 1.7 percent. Internet, health insurance, oil service, and software stocks also posted notable gains.

Other Markets

In overseas trading, stock markets across the Asia-Pacific moved modestly lower on Tuesday, extending the drop seen in the previous session. Japan's Nikkei 225 Index edged down by 0.1 percent, while Hong Kong's Hang Seng Index slipped 0.2 percent.

Meanwhile, the major European markets moved sharply higher over the course of the trading day. While the U.K.'s FTSE 100 Index surged up by 1.8 percent, the German DAX Index and the French CAC 40 Index both jumped by 2.7 percent.

In the bond market, treasuries moved to the downside following the successful Spanish bond auctions. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 3.5 basis points to 2.009 percent.

Looking Ahead

Amid a lack of any major U.S. economic data, earnings news is likely to be in focus during trading on Wednesday. Tech giants Intel (INTC), IBM (IBM), and Yahoo (YHOO) are among the companies releasing their quarterly results after the close of today's trading.

by RTTNews Staff Writer

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