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Stocks Extend Upward Move On Upbeat Earnings News - U.S. Commentary


With traders reacting positively to the latest batch of earnings news, stocks saw modest strength during trading on Wednesday. The gains on the day extended a recent upward move by the markets, although buying interest was somewhat subdued.

The major averages all ended the day in positive territory, with the Dow and the S&P 500 reaching new five-year closing highs. The Dow rose 66.96 points or 0.5 percent to 13,779.17, the Nasdaq climbed 10.49 points or 0.3 percent to 3,153.67 and the S&P 500 edged up 2.22 points or 0.2 percent to 1,494.78.

The strength on Wall Street came as traders largely reacted positively to the latest earnings news, with upbeat quarterly results from some big-name companies inspiring confidence that the markets can sustain some further upside.

Tech giants IBM Corp. (IBM) and Google (GOOG) both posted notable gains after reporting fourth quarter earnings that exceeded analyst estimates. IBM rose by 4.4 percent, while Google advanced by 5.5 percent.

McDonald's (MCD) posted a more modest gain after the fast food giant reported fourth quarter earnings that rose year-over-year and came in above analyst estimates. The company also reported stronger than expected revenue growth.

Fellow Dow component United Technologies (UTX) reported fourth quarter earnings that fell compared to the year-ago quarter but still came in slightly above expectations. The diversified conglomerate also reaffirmed its guidance for 2013.

Shares of iPad and iPhone maker Apple (AAPL) ended the day up by 1.8 percent ahead of the release of its fiscal first quarter results after the close of trading.

The markets also benefited from positive sentiment generated by news that the House voted to approve a bill that would temporarily suspend the U.S. debt limit for nearly four months.

The House voted 285 to 144 to approve the legislation, called the "No Budget, No Pay Act," which ties the suspension of the federal debt limit to the passage of a budget plan by both the House and the Senate.

If a budget resolution is not passed by April 15th, the salaries of the members of the chamber that does not act will be placed in an escrow account until a budget is approved.

Nonetheless, buying interest was relatively subdued, as traders were somewhat reluctant to continue buying stocks following the recent strength.

Sector News

With IBM helping to lead the way higher, computer hardware stocks saw considerable strength on the day. The NYSE Arca Computer Hardware Index surged up by 1.9 percent to its best closing level in eight months.

Railroad stocks also moved notably higher over the course of the session, driving the Dow Jones Railroads Index up by 1.8 percent. CSX Corp. (CSX) turned in one of the railroad sectors best performances after reporting better than expected fourth quarter results.

Semiconductor and housing stocks also saw significant strength, while gold stocks came under pressure on the day. The NYSE Arca Gold Bugs Index fell by 2.9 percent due in part to a steep drop by shares of Iamgold (IAG).

Healthcare provider, biotechnology, and brokerage stocks also moved to the downside on the day, partly offsetting the strength in other sectors.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in another mixed performance during trading on Wednesday. Japan's Nikkei 225 Index tumbled by 2.1 percent, while China's Shanghai Composite Index rose by 0.3 percent.

The major European also ended the day mixed. While the French CAC 40 Index fell by 0.4 percent, the U.K.'s FTSE 100 Index and the German DAX Index edged up by 0.3 percent and 0.2 percent, respectively.

In the bond market, treasuries ended the day roughly flat after failing to sustain an early upward move. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, edged down by less than a basis point to 1.833 percent.

Looking Ahead

Earnings news is likely to remain in focus on Thursday, with reaction to Apple's quarterly results likely to have a significant impact on trading.

Trading could also be impacted by reaction to quarterly results from 3M (MMM), United Continental (UAL), and KeyCorp (KEY), which are among the companies due to release their results before the start of trading.

Economic data may also attract some attention on Thursday, with traders likely to keep an eye on reports on weekly jobless claims and leading economic indicators.

by RTTNews Staff Writer

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