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Stocks Close Mostly Higher Amid Light Trading Day - U.S. Commentary


After showing a strong move to the upside in early trading on Friday, stocks continued to perform well throughout the session. Buying interest waned in the afternoon, but the major averages managed to remain firmly positive.

While the Dow once again encountered resistance around the 14,000 level and pulled back well off its highs, the average still closed up 48.92 points at 13,992.97. The Nasdaq jumped 28.74 points or 0.9 percent to 3,193.87 and the S&P 500 rose 8.54 points or 0.6 percent to 1,517.93.

For the week, the major averages turned in a mixed performance, as the Dow posted its first weekly loss of the New Year. The Dow edged down by 0.1 percent, while the Nasdaq and the S&P 500 rose by 0.5 percent and 0.3 percent, respectively.

The strength on Wall Street was 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, while economists had expected the deficit to shrink to $46.0 billion.

The trade deficit for December reflected the smallest U.S. trade deficit since the $37.1 billion deficit reported for January of 2010.

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.

However, trading activity slowed dramatically in afternoon trading, with a number of traders away from their desks amid a blizzard warning for New York and large parts of the Northeast.

Sector News

Health insurance stocks showed a strong move to the upside on the day, driving the Morgan Stanley Healthcare Payor Index up by 2 percent. With the gain, the index reached a new record closing high.

Molina Healthcare (MOH) helped to lead the health insurance sector higher, surging up by 10.4 percent after reporting much better than expected fourth quarter earnings and providing upbeat guidance.

Significant strength was also visible among biotechnology stocks, as reflected by the 1.4 percent gain posted by the NYSE Arca Biotechnology Index. Dendreon (DNDN) and Sequenom (SQNM) posted standout gains.

Semiconductor, computer hardware, and oil service stocks also saw notable strength, moving to the upside along with most of the major sectors.

Other Markets

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.

Meanwhile, the major European markets all moved to the upside on the day. While the French CAC 40 Index surged up by 1.4 percent, the German DAX Index and the U.K.'s FTSE 100 Index rose by 0.8 percent and 0.6 percent, respectively.

In the bond market, treasuries rebounded after coming under pressure in early trading, ending the day nearly flat. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, edged up by less than a basis point to 1.954 percent after hitting an early high of 1.991 percent.

Looking Ahead

While earnings season is winding down, a number of big-name companies are due to release their quarterly results next week, including Coca-Cola (KO), Cisco (CSCO), General Electric (GE), PepsiCo (PEP), Goodyear (GT), Applied Materials (AMAT), and Deere (DE).

Trading could also be impacted by the release of key economic reports on retail sales, industrial production, and weekly jobless claims.

by RTTNews Staff Writer

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