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Stocks Holding On To Strong Gains In Mid-Day Trading - U.S. Commentary


Stocks are seeing continued strength in mid-day trading on Tuesday after showing a notable move to the upside earlier in the session. The gains on the day lifted the Dow to a new record intraday high, while the S&P 500 has moved within striking distance of its all-time high.

The major averages have given back some ground in recent trading but remain firmly positive. The Dow is up 92.79 points or 0.6 percent at 14,665.64, the Nasdaq is up 22.33 points or 0.7 percent at 3,261.50 and the S&P 500 is up 9.61 points or 0.6 percent at 1,571.78.

The strength on Wall Street is partly due to a substantial rally by health insurance stocks, which are extending a substantial upward move seen late in the previous session.

The gains by health insurance stocks come on the heels of news that the Centers for Medicare & Medicaid Services will increase the Medicare Advantage payment rate by 3.3 percent in 2014, scrapping the 2.3 percent cut announced in February.

Buying interest was also generated by a rally by European stocks, which moved sharply higher despite disappointing reports on European manufacturing activity and unemployment.

Traders may be looking ahead to the European Central Bank's announcement of its latest monetary policy decision on Thursday.

Martin van Vliet, Senior Economist at ING, said, "While we cannot fully rule out a surprise rate cut or new unconventional support on Thursday, the most likely scenario is for the ECB to keep rates on hold and for Draghi to reaffirm that monetary policy will remain accommodative 'as long as needed.'"

On the U.S. economic front, the Commerce Department released a report showing a notable rebound in factory orders in the month of February.

The report said factory orders surged up by 3.0 percent in February following a revised 1.0 percent decrease in January. Economists had expected orders to increase by 2.9 percent.

Excluding a jump in orders for transportation equipment, factory orders edged up by 0.3 percent in February compared to a 2.0 percent increase in January.

Among individual stocks, BGC Partners (BGCP) is posting a standout gain after announcing an agreement to sell its electronic bond-trading platform to Nasdaq (NDAQ) for $750 million in cash. Shares of BGC have surged up by 42.3 percent.

Nuance Communications (NUAN) is also turning in a strong performance on news that billionaire investor Carl Icahn has taken a 9.3 percent stake in the in speech recognition and digital imaging software developer.

On the other hand, shares of Hewlett-Packard (HPQ) have come under pressure after Goldman Sachs downgraded its rating on the PC giant to Sell from Neutral.

Sector News

As mentioned above, health insurance stocks are turning in some of the market's best performances in mid-day trading. Reflecting the strength in the sector, the Morgan Stanley Healthcare Payor Index is up by 3.5 percent after reaching a record intraday high.

Significant strength is also visible among biotechnology stocks, as reflected by the 1.6 percent gain being posted by the NYSE Arca Biotechnology Index. The index has also reached a record high amid strong gains by Dendreon (DNDN), Alexion (ALXN), and Regeneron (REGN).

Railroad, retail, and pharmaceutical stocks are also seeing strength on the day, with the strength among pharmaceutical stocks lifting the NYSE Arca Pharmaceutical Index to a twelve-year high.

On the other hand, airline stocks have come under considerable selling pressure, dragging the NYSE Arca Airline Index down by 2.8 percent. Gold stocks are also moving notably lower along with the price of the precious metal.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in another mixed performance during trading on Tuesday. While Japan's Nikkei 225 Index fell by 1.1 percent, Hong Kong's Hang Seng Index rose by 0.3 percent.

Meanwhile, the major European markets all showed strong moves to the upside on the day. The U.K.'s FTSE 100 Index jumped by 1.2 percent, while the German DAX Index and the French CAC 40 Index surged up by 1.9 percent and 2 percent, respectively.

In the bond market, treasuries have given back some ground after turning higher over the course of the previous session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 2.4 basis points at 1.864 percent.

by RTTNews Staff Writer

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