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Stocks See Solid Gains As Fed Keeps Interest Rates Steady - U.S. Commentary

Stocks saw solid gains on Tuesday as traders digested the Federal Reserve's decision to once again leave rates near their historic lows. The major averages all closed firmly in positive territory after yesterday's lackluster session.

The Federal Open Market Committee left rates unchanged and also made little change in the language behind the decision, stating that economic activity continued to strengthen and the labor market is stabilizing. The Fed also said that its remaining mortgage security purchases are near completion and will end in March.

In the statement, the Fed also reiterated that economic conditions are likely to warrant low levels of the federal funds rate for an extended period, although Kansas City Fed President Thomas Hoenig continued to vote for a change in the language.

Earlier today, the markets were presented with a report from the Commerce Department showing a notable decrease in new residential construction in February, with the drop in housing starts reflecting the impact of severe snowstorms across the country.

Also on the economic front today, the Labor Department released a report showing a modest decrease in import prices in the month of February, as fuel prices were under pressure. The report also showed a drop in export prices.

The major averages saw further upside in late-session dealing, closing near their highs of the session. The Dow gained 43.83 points or 0.4 percent to end at 10,685.98, the Nasdaq advanced by 15.80 points or 0.7 percent to 2,378.01, and the S&P 500 rose by 8.95 points or 0.8 percent to 1,159.46.

With the gains, the Dow ended the session at a nearly two-month closing high, while the Nasdaq and the S&P 500 both reached their best closing levels in well over a year.

Sector News

Gold stocks were some of the day's best performers, driving the NYSE Arca Gold Bugs Index up by 3 percent amid a substantial increase in gold prices. Gold for April delivery April settled $17.10 higher at $1122.50 per ounce after touching an intra-day high of $1.128.10 an ounce.

Steel stocks also closed considerably higher, further reflecting the day's strength among metal stocks. The NYSE Arca Steel Index closed up by 2.4 percent, setting a fresh two-month high.

The index was helped higher by shares of Cliffs Natural Resources Inc. (CLF), which gained 4.9 percent. The advance propelled the stock to an eighteen-month closing high.

Semiconductor, commercial real estate, tucking and housing stocks were also big gainers on the day, indicative of the broad-based strength in today's session.

Dow Components

The Dow was led higher by shares of General Electric (GE), which gained 4.5 percent. The stock closed at a fifteen-month high after JP Morgan Chase issued an optimistic outlook for the firm's near-term earnings.

Intel (INTC) was the second biggest percentage gainer in the Dow amid speculation that the semiconductor giant is set to pre-announce strong quarterly results. The stock rose by 4 percent and ended the day at an eighteen month closing high.

Alcoa (AA), DuPont (DD), Bank of America (BAC) and Wal-Mart (WMT) also advanced, while Boeing (BA) limited the upside for the blue chip index, sliding by 1 percent. The pullback dragged the stock further off of last week's twenty-one month closing high.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region closed mixed on Tuesday. Japan's benchmark Nikkei 225 Index dipped by 0.3 percent, while China's Shanghai Composite Index rose by 0.5 percent.

Meanwhile, the major European markets all saw notable gains on the day. The U.K.'s FTSE 100 Index rose by 0.5 percent, while the German DAX Index and the French CAC 40 Index closed up by 1.1 percent and 1.2 percent, respectively.

In the bond markets, treasuries rose by significant margins following the Fed's statement. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, closed at 3.653 percent, posting a loss of 5.1 basis points.

Looking Ahead

The economic calendar is relatively light on Wednesday, with data on producer prices likely to be in focus as traders look to the latest reading on inflation amid the ongoing stimulus measures from the U.S. government.

Home purchase application data and the weekly oil inventories report are also likely to garner some attention.

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