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Stocks Seeing Early Strength Following Trade Data - U.S. Commentary


Stocks have moved mostly higher in early trading on Friday, extending the upward move seen yesterday afternoon. The major averages have climbed into positive territory, offsetting the modest losses posted in the previous session.

The major averages have seen some further upside in the past few minutes, reaching new highs for the young session. The Dow is up 68.7 points or 0.5 percent at 14,013.02, the Nasdaq is up 26.49 points or 0.8 percent at 3,191.62 and the S&P 500 is up 7.86 points or 0.5 percent at 1,517.25.

The early strength on Wall Street is partly due to a positive reaction to a Commerce Department report showing a much narrower than expected U.S. trade deficit for the month of December, with the data potentially leading to an upward revision to the disappointing fourth quarter GDP data.

The report showed that the U.S. trade deficit narrowed to $38.5 billion in December from a revised $48.6 billion in November. Economists had expected the deficit to shrink to $46.0 billion.

Paul Ashworth, Chief U.S. Economist at Capital Economics, said the much narrower than expected trade deficit "pretty much guarantees that the dip in fourth-quarter GDP will be revised to a small gain in the second estimate."

The initial report on fourth quarter GDP showed a 0.1 percent contraction compared to economist estimates for an increase of about 1.0 percent.

In a positive sign for the global economy, a separate report released by the Chinese National Bureau of Statistics earlier in the day showed that the Chinese trade surplus came in at $29.2 billion in January compared to the $24.2 billion surplus expected by economists.

Health insurance stocks are seeing early strength on the day, with Molina Healthcare (MOH) leading the way higher after reporting much better than expected fourth quarter earnings and providing upbeat guidance. Shares of Molina have surged up by 11.9 percent.

Semiconductor, networking, and airline stocks have also moved to the upside, although buying interest is somewhat subdued.

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher on Friday. Australia's All Ordinaries Index advanced by 0.7 percent, while Hong Kong's Hang Seng Index edged up by 0.2 percent. However, Japan's Nikkei 225 Index bucked the uptrend and tumbled by 1.8 percent.

The major European markets have moved to the upside on the day. While the French CAC 40 Index has surged up by 1.1 percent, the U.K.'s FTSE 100 Index and the German DAX Index are up by 0.7 percent and 0.6 percent, respectively.

In the bond market, treasuries have moved back to the downside after moving higher over the course of the two previous sessions. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 2.9 basis points at 1.98 percent.

by RTTNews Staff Writer

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