After moving modestly lower in early trading, stocks showed a substantial turnaround over the course of the trading day on Friday. The markets benefited from a positive reaction to the latest reports regarding the world's central banks.
The major averages moved roughly sideways going into the close, ending the day firmly in positive territory. The Dow jumped 100.51 points or 0.8 percent at 13,157.97, the Nasdaq rose 16.39 points or 0.5 percent to 3,069.79 and the S&P 500 advanced 9.05 points or 0.7 percent to 1,411.13.
Despite the gains on the day, the major averages all moved lower for the week. The Dow fell by 0.9 percent, while the Nasdaq and the S&P 500 slid by 0.2 percent and 0.5 percent, respectively.
The strength that emerged on Wall Street was partly due to a report from Reuters indicating that the European Central Bank is considering setting yield band targets under a new bond-buying program.
Central bank sources told Reuters that setting a band is an option gaining in favor among central bankers, but the decision would not be made before the ECB's next monetary policy meeting on September 6th.
Buying interest was also generated by news of a letter Federal Reserve Chairman Ben Bernanke sent to Rep. Darrell Issa, R-Calif., defending the Fed's actions to support the economy.
In the letter, which was obtained by the Wall Street Journal, Bernanke also told Issa there is "scope for further action by the Federal Reserve to ease financial conditions and strengthen the recovery."
The weakness seen early in the session was partly due to a negative reaction to the Commerce Department's report on durable goods orders in the month of July.
While the report showed a much bigger than expected increase in durable goods orders, the increase was largely due to strength in the volatile transportation sector. The report also showed a continued decrease by a key indicator of business spending.
Traders also continued to express concerns about the situation in Europe, where Greek Prime Minister Antonis Samaras held a meeting with Chancellor Angela Merkel.
In remarks at a joint press conference, Samaras pledged that Greece will "stick to its commitments and fulfill its obligations" but noted that the debt-plagued nation needs "time to breathe" as it undertakes crucial reforms.
Merkel did not immediately respond to the request for more time to implement reforms but stressed that Germany wants to help Greece remain in the eurozone.
Housing stocks showed a strong move to the upside over the course of the trading day, driving the Philadelphia Housing Sector Index up by 1.3 percent. With the gain, the index reached a four-year closing high.
M/I Homes (MHO) and Standard Pacific (SPF) turned in two of the housing sector's best performances, advancing by 4.4 percent and 4.2 percent, respectively.
Significant strength also emerged among telecom stocks, as reflected by the 1.2 percent gain posted by the NYSE Arca North American Telecom Index. Verizon (VZ) and Sprint Nextel (S) posted notable gains on the day.
Natural gas, computer hardware, and biotechnology stocks also saw considerable strength, moving to the upside along with most of the other major sectors.
In overseas trading, stock markets across the Asia-Pacific region moved mostly lower on Friday following the negative lead from Wall Street. Japan's Nikkei 225 Index fell by 1.2 percent, while Hong Kong's Hang Seng Index dropped by 1.3 percent.
Meanwhile, the major European markets moved to the upside going into the close. While the U.K.'s FTSE 100 Index ended the day flat, the French CAC 40 Index closed just above the unchanged line and the German DAX Index rose by 0.3 percent.
In the bond market, treasuries turned modestly lower over the course of the trading day after failing to sustain an early upward move. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, edged up by 1.2 basis points to 1.678 percent after hitting a low of 1.632 percent.
Following this week's relatively light economic calendar, a slew of data is scheduled to be released next week. Traders are likely to keep an eye on reports on consumer confidence, pending home sales, personal income and spending, and Chicago-area business activity.
by RTT Staff Writer
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