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Stocks Close Firmly Positive On Upbeat Apple Earnings - U.S. Commentary

With traders reacting positively to better than expected quarterly results from tech giant Apple (AAPL), stocks saw significant strength during trading on Wednesday. The markets continued to perform well following the Federal Reserve's monetary policy announcement.

After moving sharply higher in early trading, the major averages hovered firmly in positive territory throughout the day. The Dow rose 89.16 points or 0.7 percent to 13,090.72, the Nasdaq surged up 68.03 points or 2.3 percent to 3,029.63 and the S&P 500 climbed 18.72 points or 1.4 percent to 1,390.69.

The strong upward move seen early in the session was largely due to the upbeat earnings news from Apple, the world's largest publicly-traded company by market capitalization. Shares of Apple jumped 8.9 percent on the news.

After the close of trading on Tuesday, Apple reported second quarter earnings of $12.30 per share, higher than $6.40 per share last year, while revenues jumped 59 percent to $39.2 billion. Analysts had expected the company to earn $10.06 per share on revenues of $36.8 billion.

The company benefited from a notable increase in the number of iPhones sold during the quarter, which soared 88 percent year-over-year to 35.1 million.

Stocks saw continued strength following the Federal Reserve's monetary policy statement, which was largely unchanged from the previous statement.

The Fed left interest rates at near-zero levels and reiterated that economic conditions are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014.

Additionally, the central bank said it now expects GDP to increase by 2.4 to 2.9 percent in 2012 compared to its previous forecast for 2.2 to 2.7 percent growth.

At a press conference in Washington, Fed Chairman Bernanke assured that all policy tools remain at the Fed's disposal, but analysts say the Fed's optimistic outlook takes additional asset purchases off the table barring a turn for the worse for the economy.

Meanwhile, traders largely shrugged off the release of a report from the Commerce Department showing a sharp drop in durable goods orders in the month of March.

The report showed that durable goods orders tumbled by 4.2 percent in March following a revised 1.9 percent increase in February. Economists had expected a more modest drop of about 1.5 percent.

Sector News

Most of the major sectors moved to the upside on the day, reflecting broad based buying interest. Gold stocks showed a particularly strong upward move over the course of the session, driving the NYSE Arca Gold Bugs Index up by 2.8 percent.

The strength among gold stocks came as the price of the precious metal climbed well off its lows for the session, although gold for June delivery still ended the day modestly lower.

Significant strength was also visible among chemical stocks, as reflected by the 2.7 percent gain posted by the Dow Jones Chemicals Index. FMC Corp. (FMC) turned in one of the sector's best performances after declaring a 2-for-1 stock split and a quarterly dividend of $0.09 per share.

Healthcare provider stocks also saw considerable strength, driving the Morgan Stanley Healthcare Provider Index up by 2.6 percent. Kindred Healthcare (KND) helped to lead the healthcare provider sector higher, surging up by 18.8 percent.

Computer hardware, railroad, semiconductor, and steel stocks also posted strong gains, with Apple leading the hardware sector to the upside.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in another mixed performance on Wednesday. Japan's Nikkei 225 Index rose by 1 percent, while Hong Kong's Hang Seng Index edged down by 0.2 percent.

Meanwhile, the major European markets all ended the day on the upside. While the U.K.'s FTSE 100 Index crept up by 0.2 percent, the German DAX Index and the French CAC 40 Index jumped by 1.7 percent and 2 percent, respectively.

In the bond market, treasuries closed modestly lower following the announcement from the Fed. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 2.3 basis points to 1.984 percent.

Looking Ahead

Earnings news is likely to remain in focus on Thursday, with Aetna (AET), Bristol-Myers Squibb (BMY), Dow Chemical (DOW), Exxon Mobil (XOM), Kellogg (K), PepsiCo (PEP), Tyco (TYC), and UPS (UPS) among the companies scheduled to release their quarterly results before the start of trading.

Trading could also be impacted by the release of reports on weekly jobless claims and pending home sales in the month of March.

by RTTNews Staff Writer

For comments and feedback: editorial@rttnews.com

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