While buying interest has waned from earlier in the session, stocks remain mostly positive in mid-day trading on Tuesday. The Dow and the S&P 500 have reached new five-year highs, but uncertainty about the outlook for the markets has limited the upside.
The major averages have moved roughly sideways in recent trading, hovering in positive territory. The Dow is up 51.67 points or 0.4 percent at 14,033.43, the Nasdaq is up 10.58 points or 0.3 percent at 3,202.61 and the S&P 500 is up 7.10 points or 0.5 percent at 1,526.89.
The strength on Wall Street is partly due to a rally by European stocks, which moved notably higher on the heels of an upbeat report on economic sentiment in Germany.
The Zew Institute's economic sentiment index for Germany rose 16.7 points to 48.2 in February, marking the third straight month of growth. Economists had expected a reading of 35.
Positive sentiment has also been generated by reports of additional activity on the merger-and-acquisition front, with Office Depot (ODP) and OfficeMax (OMX) both moving sharply higher on reports that the office supplies retailers are engaged in advanced merger talks.
Citing people familiar with the matter, the Wall Street Journal said the deal between Office Depot and OfficeMax is expected to be stock-for-stock, although the paper said precise terms couldn't be learned.
Meanwhile, traders have largely shrugged off a report from the National Association of Home Builders showing that homebuilder confidence has unexpectedly deteriorated in the month of February.
The report said the NAHB/Wells Fargo Housing Market Index edged down to a reading of 46 in February from 47 in January. The modest drop by the Housing Market Index came as a surprise to economists, who had expected the index to inch up to 48.
NAHB Chief Economist David Crowe, said, "Having risen strongly in 2012, the HMI hit a slight pause in the beginning of this year as builders adjusted their expectations to reflect the pace at which consumers are moving forward on new-home purchases."
As mentioned above, trading activity is relatively subdued amid continued uncertainty about the near-term outlook for the markets.
While the markets are generally seen as overbought, traders seem reluctant to sell stocks and miss out on any further upside.
Airline stocks are turning in some of the market's best performances in mid-day trading, with the NYSE Arca Airline Index up by 1.5 percent. SkyWest (SKYW) has helped to lead the airline sector higher, surging up by 5.2 percent amid speculation regional airlines could see further consolidation.
Considerable strength is also visible among natural gas stocks, as reflected by the 1.2 percent gain being posted by the NYSE Arca Natural Gas Index. The strength in the sector comes as natural gas for March delivery is climbing $0.118 to $3.271 per million BTUs.
Oil, banking, and pharmaceutical stocks are also seeing notable strength, although buying interest has remained somewhat subdued.
On the other hand, health insurance stocks have fallen sharply on news that the government's preliminary Medicare Advantage payment rates showed steeper than expected cuts. Reflecting the weakness in the sector, the Morgan Stanley Healthcare Payor Index has tumbled by 1.8 percent.
Gold stocks have also come under pressure on the day, moving lower along with the price of gold. The NYSE Arca Gold Bugs Index is down by 1.3 percent after hitting a nine-month intraday low.
In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Tuesday. While Japan's Nikkei 225 Index fell by 0.3 percent, Australia's All Ordinaries Index rose by 0.4 percent.
Meanwhile, the major European markets showed notable moves to the upside. The U.K.'s FTSE 100 Index advanced by 1 percent, while the German DAX Index and the French CAC 40 Index jumped by 1.6 percent and 1.9 percent, respectively.
In the bond market, treasuries have pulled back near the unchanged line after moving modestly higher in early trading. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is down by less than a basis point at 2.005 percent.
by RTT Staff Writer
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