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Stocks Close Mostly Higher Amid Optimism About Earnings - U.S. Commentary


After ending the two previous sessions in the red, stocks moved back to the upside during trading on Wednesday. The markets benefited from optimism about the outlook for corporate earnings following the release of quarterly results from Alcoa (AA).

The major averages ended the day firmly in positive territory but well off their best levels of the day. The Dow rose 61.66 points or 0.5 percent to 13,390.51, the Nasdaq advanced 14.00 points or 0.5 percent to 3,105.81 and the S&P 500 climbed 3.87 points or 0.3 percent at 1,461.02.

The strength on Wall Street was partly due to a positive reaction to quarterly results from Alcoa, which unofficially kicked off the earnings season after the close of trading on Tuesday.

Alcoa reported fourth quarter adjusted earnings of $0.06 per share compared to a year ago loss of $0.03 per share, matching analyst estimates. The aluminum giant also reported fourth quarter revenues that came in above expectations and forecast a 7 percent increase in aluminum demand in 2013.

While shares of Alcoa rose as much as 2.5 percent at the open and reached a three-month high, the stock turned lower over the course of the trading day. Alcoa ended the session down by 0.2 percent.

The news from Alcoa generated some optimism about the unfolding earnings season, although traders still seemed reluctant to add to the substantial rally that was seen last week.

A lack of major U.S. economic data helped to keep some traders on the sidelines, with today reflecting the third straight quiet day on the economic front.

Among individual stocks, shares of Clearwire (CLWR) moved sharply higher after the wireless broadband operator received an unsolicited takeover bid from Dish Network (DISH) valuing the company at $3.30 per share. Clearwire jumped 7.2 percent on the day.

Social media giant Facebook (FB) also posted a strong gain after the company issued a mysterious invitation to journalists to "Come and see what we're building." Some are speculating that the company plans to unveil a Facebook phone.

On the other hand, shares of Apollo Group (APOL) came under pressure after the parent of the University of Phoenix reported first quarter earnings that fell year-over-year amid a continued drop in new enrollment. Apollo Group tumbled by 7.8 percent.

Sector News

Computer hardware stocks saw considerable strength on the day, resulting in a 1.6 percent gain by the NYSE Arca Computer Hardware Index. Seagate Technology (STX) helped to lead the hardware sector higher after raising its second quarter guidance.

Significant strength was also visible among defense stocks, as reflected by the 1.3 percent gain posted by the Philadelphia Defense Sector Index. Aerospace giant Boeing (BA) posted a strong gain after falling sharply in the two previous sessions.

Housing, trucking, and semiconductor stocks also saw notable strength, although buying interest was somewhat subdued.

On the other hand, some banking stocks came under pressure on the day, with Bank of America (BAC) falling by 4.6 percent after Credit Suisse downgraded its rating on the stock to neutral from outperform.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher on Wednesday. Japan's Nikkei 225 Index advanced by 0.7 percent, while Hong Kong's Hang Seng Index ended the day up by 0.5 percent.

The major European markets also moved to the upside on the day. While the U.K.'s FTSE 100 Index rose by 0.7 percent, the French CAC 40 Index and the German DAX Index both closed up by 0.3 percent.

In the bond market, treasuries ended the day modestly higher despite a disappointing ten-year note auction. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, slipped 1.9 basis points to 1.852 percent.

Looking Ahead

Trading on Thursday could be impacted by reaction to the European Central Bank's latest monetary policy decision as well as reports on U.S. weekly jobless claims and wholesale inventories.

by RTTNews Staff Writer

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