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Stocks Move Sharply Higher On Upbeat Earnings, Economic News - U.S. Commentary

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Following the pullback in the previous session, stocks moved sharply higher over the course of the trading day on Tuesday. The major averages more than offset yesterday's losses, extending the rebound seen last Friday.

The major averages ended the session just off their best levels of the day. The Dow surged up 547.87 points or 2.2 percent to 25,798.42, the Nasdaq soared 214.75 points or 2.9 percent to 7,645.49 and the S&P 500 jumped 59.13 points or 2.2 percent to 2,809.92.

The rally on Wall Street partly reflected a positive reaction to upbeat earnings news from several big-name companies, with financial giants Goldman Sachs (GS) and Morgan Stanley (MS) reporting third quarter results that beat estimates on both the top and bottom lines.

Healthcare giant Johnson & Johnson (JNJ) also reported better than expected quarterly results, while health insurer UnitedHealth (UNH) reported third quarter results that exceeded expectations and raised its full-year guidance.

Buying interest was also generated following the release of positive economic data, including a report from the Federal Reserve showing industrial production increased in line with economist estimates in September.

The report said industrial production rose by 0.3 percent in September after climbing by 0.4 percent in August. The continued increase in production matched expectations.

The Fed said output growth in September was held down slightly by Hurricane Florence but noted the estimated negative effect was less than 0.1 percentage points.

A separate report from the National Association of Home Builders showed an unexpected uptick in homebuilder confidence in the month of October.

The report said the NAHB/Wells Fargo Housing Market Index inched up to 68 in October from 67 in September. Economists had expected the index to come in unchanged.

Sector News

Biotechnology stocks showed a substantial move to the upside, driving the NYSE Arca Biotechnology Index up by 4.4 percent. With the gain, the index climbed further off the three-month closing low set last Thursday.

Gilead Sciences (GILD), Amgen (AMGN), and Celgene (CELG) turned in some of the biotech sector's best performances on the day.

Significant strength was also visible among software stocks, as reflected by the 3.7 percent jump by the Dow Jones Software Index.

Adobe (ADBE) led the software sector higher after reaffirming its fiscal fourth quarter earnings and revenue guidance and forecasting 20 percent year-over-year revenue growth in fiscal 2019.

Housing stocks also saw considerable strength on the heels of the upbeat homebuilder confidence data, with the Philadelphia Housing Sector Index climbing by 2.4 percent. The index ended last Friday's trading at its lowest closing level in well over a year.

Semiconductor, healthcare, computer hardware and retail stocks also moved notably higher, reflecting broad based buying interest on Wall Street.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Tuesday. Japan's Nikkei 225 Index jumped by 1.3 percent, while China's Shanghai Composite Index slumped by 0.9 percent.

Meanwhile, the major European markets all moved to the upside on the day. While the U.K.'s FTSE 100 Index rose by 0.4 percent, the German DAX Index and the French CAC 40 Index surged up by 1.4 percent and 1.5 percent, respectively.

In the bond market, treasuries showed a lack of direction before ending the session roughly flat. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, edged down by less than a basis point to 3.156 percent.

Looking Ahead

Earnings news is likely to remain in focus on Wednesday, with IBM Corp. (IBM), Netflix (NFLX), and United Continental (UAL) among the companies releasing their quarterly results after the close of today's trading.

Abbot Labs (ABT), M&T Bank (MTB), Supervalu (SVU), and Winnebago (WGO) are also among the companies due to report their results before the start of trading on Wednesday.

A report on housing starts may also attract attention along with the minutes of the Federal Reserve's latest monetary policy meeting, which may shed additional light on the outlook for interest rates.

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