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Upbeat Economic Data Leads To Rally On Wall Street - U.S. Commentary


After moving mostly higher over the course of the previous session, stocks saw considerable further upside during trading on Wednesday. With the rally on the day, the markets continued to offset the sharp pullback that was seen on Monday.

The major averages gave back some ground going into the close but still ended the day firmly in positive territory. The Dow surged up 175.24 points or 1.3 percent to 14,075.37, the Nasdaq climbed 32.61 points or 1 percent to 3,162.26 and the S&P 500 jumped 19.05 points or 1.3 percent to 1,515.99.

The strong upward move on the day lifted the Dow to its best closing level in well over five years, while the broader Nasdaq and S&P 500 remain below the multi-year highs set last week.

The substantial strength that emerged on Wall Street was partly due to 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 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 also kept a close eye on Capitol Hill, as Federal Reserve Chairman Ben Bernanke delivered his second consecutive day of Congressional testimony.

Appearing before the House Financial Services Committee, Bernanke reaffirmed his support for maintaining the Fed's highly accommodative monetary policy.

Sector News

Transportation stocks showed a substantial move to the upside over the course of the trading session, driving the Dow Jones Transportation Average up by 2.9 percent. With the gain, the index climbed back near the record closing high it set last Tuesday.

Kansas City Southern (KSU) and J.B. Hunt (JBHT) turned in two of the transportation sector's best performances, jumping by 6.2 percent and 5.2 percent, respectively.

Significant strength was also visible among chemical stocks, as reflected by the 2.1 percent gain posted by the Dow Jones Chemicals Index. With the gain, the index climbed further off Monday's nearly two-month closing low.

Biotechnology stocks also saw considerable strength on the day, resulting in a 2 percent gain by the NYSE Arca Biotechnology Index. Healthcare, defense, and semiconductor stocks also posted notable gains amid broad based buying interest.

Meanwhile, gold stocks bucked the uptrend by the broader markets, moving back to the downside along with the price of the precious metal. With gold for April delivery sliding $19.80 to $1,595.70 an ounce, the NYSE Arca Gold Bugs Index fell by 1.9 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 turned lower over the course of the session after moving to the upside in early trading. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 2.4 basis points to 1.903 percent after hitting a low of 1.843 percent.

Looking Ahead

Economic data may attract some attention on Thursday, with the Commerce Department due to release its revised estimate of fourth quarter GDP. Reports on weekly jobless claims and Chicago area business activity could also impact trading.

by RTTNews Staff Writer

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