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Stocks Moving To The Upside On Upbeat Economic Data - U.S. Commentary


Stocks have shown a strong upward move over the course of the trading day on Wednesday on the heels of some upbeat earnings news. With the gains, the markets continue to recover from the sharp pullback that was seen on Monday.

The major averages have seen some further upside in recent trading, reaching new highs for the session. The Dow is up 102.96 points or 0.7 percent at 14,003.09, the Nasdaq is up 32.18 points or 1 percent at 3,161.82 and the S&P 500 is up 13.45 points or 0.9 percent at 1,510.39.

The strength that has emerged on Wall Street reflects a positive reaction to a pair of reports on durable goods orders and pending home sales.

While the Commerce Department's durable goods orders report showed that total orders fell by more than anticipated, orders actually rose by much more than expected when excluding orders for transportation equipment.

Excluding a 19.8 percent drop in orders for transportation equipment, durable goods orders rose by 1.9 percent in January compared to economist estimates for a 0.2 percent increase.

The report also showed a 6.3 percent jump in orders for non-defense capital goods excluding aircraft, which is seen as an indicator of business spending.

The sharp increase by the reading on business spending has offset some of the recent concerns about the impact of the looming sequester.

A separate report from the National Association of Realtors showed a much bigger than expected increase by its pending home sales index, which reached its highest level since April of 2010 in January.

NAR said its pending home sales index rose by 4.5 percent to 105.9 in January after falling by 1.9 percent to 101.3 in December. Economists had expected the index to increase by 3.0 percent.

A pending home sale is one in which a contract was signed but not yet closed. Normally, it takes four to six weeks to close a contracted sale.

Traders are also keeping an eye on Federal Reserve Chairman Ben Bernanke's testimony before the House Financial Services Committee.

Sector News

Transportation stocks have shown a substantial move to the upside over the course of the trading day, resulting in a 2.9 percent gain by the Dow Jones Transportation Average. With the gain, the index has climbed back near the record closing high it set last Tuesday.

Within in the transportation sector, Kansas City Southern (KSU) and J.B. Hunt (JBHT) are turning in two of the best performances.

Significant strength has also emerged among housing stocks, which have benefited from the upbeat pending home sales data. The Philadelphia Housing Sector Index has risen by 1.8 percent, climbing further off the nearly two-month closing low it set on Monday.

Chemical stocks are also seeing considerable strength in mid-day trading, with the Dow Jones Chemicals Index up by 1.8 percent. Natural gas, semiconductor, and oil service stocks are also posting strong gains.

Meanwhile, gold stocks have come under pressure on the day, moving back to the downside along with the price of the precious metal. With gold for April delivery sliding $11.10 to $1,604.40 an ounce, the NYSE Arca Gold Bugs Index is down by 1.6 percent.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher on Wednesday, although Japan's Nikkei 225 Index bucked the uptrend and fell by 1.3 percent. Australia's All Ordinaries Index advanced by 0.6 percent, while Hong Kong's Hang Seng Index rose by 0.3 percent.

The major European markets also moved to the upside on the day. While the French CAC 40 surged up by 1.9 percent, the German DAX Index and the U.K.'s FTSE 100 Index jumped 1 percent and 0.9 percent, respectively.

In the bond market, treasuries have pulled back near the unchanged after seeing early strength. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is unchanged at 1.879 percent.

by RTTNews Staff Writer

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