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Stocks Rise Sharply On Positive Reaction To Bernanke Comments - U.S. Commentary

With traders reacting positively to remarks by Federal Reserve Chairman Ben Bernanke, stocks moved sharply higher over the course of the trading day on Monday. The rally on Wall Street came after the markets turned in a mixed performance last week.

The major averages closed firmly in positive territory, at or near their best levels of the day. The Dow jumped 160.90 points or 1.2 percent to 13,241.63, the Nasdaq soared 54.65 points or 1.8 percent to 3,122.57 and the S&P 500 surged up 19.40 points or 1.4 percent to 1,416.51.

The gains lifted the Nasdaq and the S&P 500 to fresh multi-year closing highs, while the Dow closed just shy of the four-year closing high it set earlier this month.

The strong upward move by stocks came on the heels of a speech by Bernanke, who noted that the U.S. unemployment rate has declined faster than the Fed predicted but cautioned that the jobs market remains far from normal.

"We have seen some positive signs on the jobs front recently, including a pickup in monthly payroll gains and a notable decline in the unemployment rate," Bernanke told the National Association for Business Economics Annual Conference in Washington, D.C.

While the Fed chief warned that cyclical problems could turn into structural weakness in the U.S. jobs market without a more robust recovery, he assured that the Fed's zero-interest rate policy and other support measures will help reduce unemployment over time by promoting economic growth.

As a result of the focus on Bernanke's remarks, traders largely shrugged off the release of a report from the National Association of Realtors showing an unexpected drop in pending home sales in the month of February.

NAR said its pending home sales index fell by 0.5 percent to a reading of 96.5 in February after rising by 2.0 percent to a reading of 97.0 in January. The drop surprised economists, who had expected the index to increase by 1.0 percent.

A pending 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.

The unexpected decrease by the pending home sales index in February came after it reached its highest level since April of 2010 in January.

Among individual stocks, shares of Lions Gate Entertainment (LGF) jumped 4.5 percent after the company's latest movie "The Hunger Games" topped the box office with $155 million in its opening weekend, a record for a March release.

Sector News

Most of the major sectors moved to the upside on the day, as Fed Chairman Bernanke's remarks generated broad based buying interest.

Health insurance stocks posted particularly strong gains, resulting in a 3.3 percent advance by the Morgan Stanley Healthcare Payor Index. The strength in the sector came as the Supreme Court began to hear arguments regarding President Obama's landmark healthcare reform law.

Significant strength was also visible among networking stocks, as reflected by the 2.5 percent gain posted by the NYSE Arca Networking Index. Alcatel-Lucent (ALU) and Infinera (INFN) turned in two of the sector's best performances.

Airline stocks also showed a strong move to the upside as the day progressed, resulting in a 2.6 percent gain by the NYSE Arca Airline Index. Telecom, railroad, and software stocks also posted notable gains.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance on Monday. Japan's Nikkei 225 Index edged up by 0.1 percent, while Australia's All Ordinaries Index slipped by 0.1 percent.

Meanwhile, the major European markets all moved to the upside on the day. While the German DAX Index rose by 1.2 percent, the U.K.'s FTSE 100 Index and the French CAC 40 Index advanced by 0.8 percent and 0.7 percent, respectively.

In the bond market, treasuries moved back to the upside after coming under pressure in morning trading, closing nearly flat. The yield on the benchmark ten-year note, which moves opposite of its price, edged up by less than a basis point to 2.244 percent after reaching a high of 2.287 percent.

Looking Ahead

Economic data is likely to attract some attention on Tuesday, with traders likely to keep an eye on reports on U.S. home prices and consumer confidence.

On the earnings front, Lennar (LEN), McCormick (MKC), and Walgreen (WAG) are among the companies due to report their quarterly results before the start of trading on Tuesday.

by RTTNews Staff Writer

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