With traders expressing renewed optimism about the possibility of further monetary stimulus, stocks moved mostly higher during trading on Tuesday. The gains on the day extended the upward move seen over the course of the two previous sessions.
The major averages pulled back off their best levels of the day in afternoon trading but remained firmly positive. The Dow rose 51.09 points or 0.4 percent to 13,168.60, the Nasdaq jumped 25.95 points or 0.9 percent to 3,015.86 and the S&P 500 advanced 7.12 points or 0.5 percent at 1,401.35.
The gains on the day lifted the major averages to new three-month closing highs, with the Nasdaq and the S&P 500 climbing back above the key psychological levels of 3,000 and 1,400, respectively.
The continued strength on Wall Street was partly due to optimism that the European Central Bank will unveil additional measures to address the ongoing debt crisis following the release of disappointing economic data from the region.
Data from Europe showed that the Italian economy shrank in the second quarter, marking the fourth consecutive quarter of contraction. A separate report showed a steeper than expected drop in German factory orders in June.
Buying interest was also generated by comments by Boston Federal Reserve President Eric Rosengren, who called for an "open-ended" quantitative easing program to boost economic growth during an interview with CNBC.
"What I would argue for, actually, is to have it open ended. That we focus on economic outcomes," Rosengren said. "I would argue that if we do a quantitative easing program, again, we should be using economic outcomes as what we're trying to get."
Meanwhile, traders largely shrugged off a report from the Federal Reserve showing a smaller than expected increase in consumer credit in the month of June.
The report showed that consumer credit rose by $6.5 billion in June following a downwardly revised increase of $16.7 billion in May. Economists had expected credit to increase by about $10.3 billion compared to the $17.1 billion increase originally reported for the previous month.
Among individual stocks, shares of Tenet Healthcare (THC: Quote) moved sharply higher after the hospital operator reported stronger than expected second quarter earnings on an increase in patients. Tenet advanced by 9 percent on the day.
Video game maker THQ Inc. (THQI: Quote) also turned a strong performance after reporting a first quarter profit compared to a year-ago loss. The company reported an adjusted loss for the quarter that was narrower than analysts had expected.
Meanwhile, Pfizer (PFE: Quote) and Johnson & Johnson (JNJ: Quote) moved to the downside after halting studies of an experimental drug for Alzheimer's disease after it failed in a second clinical trial.
Health insurance stocks showed a strong move to the upside over the course of the trading day, driving the Morgan Stanley Healthcare Payor Index up by 2.9 percent. With the gain, the index bounced well off the one-month closing low set in the previous session.
Within the health insurance sector, Health Net (HNT) turned in one of the best performances, advancing by 7.3 percent. Molina (MOH) and WellCare (WCG) also posted notable gains.
Significant strength was also visible among natural gas stocks, as reflected by the 2.4 percent gain posted by the NYSE Arca Natural Gas Index. Chesapeake Energy (CHK: Quote) helped to lead the sector higher, surging up by 9.4 percent after reporting strong second quarter profit growth.
Networking stocks also saw considerable strength on the day, extending a recent upward move. The NYSE Arca Networking Index rose by 2.4 percent to a new one-month closing high.
Semiconductor, brokerage, and housing stocks also posted strong gains, moving higher along with most of the major sectors. On the other hand, airline, commercial real estate, and utilities stocks bucked the uptrend by the broader markets.
In overseas trading, stock markets across the Asia-Pacific region moved mostly higher on Tuesday, adding to yesterday's gains. Japan's Nikkei 225 Index advanced by 0.9 percent, while Hong Kong's Hang Seng Index ended the day up by 0.4 percent.
The major European markets also moved to the upside on the day. While the French CAC 40 Index surged up by 1.5 percent, the German DAX Index and the U.K.'s FTSE 100 Index rose by 0.7 percent and 0.6 percent, respectively.
In the bond market, treasuries moved notably lower amid the optimism about further stimulus. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, jumped 7 basis points to a one-month closing high of 1.628 percent.
Trading on Wednesday could be impacted by reaction to quarterly results from Disney (DIS: Quote), with the entertainment giant releasing its fiscal third quarter results after the close of today's trading.
Investors are also likely to keep an eye on the Labor Department's report on labor productivity and costs in the second quarter. Productivity is expected to increase by 1.3 percent, while unit labor costs are expected to rise by 0.9 percent.
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by RTT Staff Writer
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