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Stocks Show Strong Move Back To The Upside - U.S. Commentary


After moving mostly lower over the course of the two previous sessions, stocks showed a strong move back to the upside during trading on Friday. The markets saw a notable rebound, although the major averages remained below Tuesday's multi-year highs.

The major averages saw further upside going into the close, ending the session at their best levels of the day. The Dow rose 119.95 points or 0.9 percent to 14,000.57, the Nasdaq jumped 30.33 points or 1 percent to 3,161.82 and the S&P 500 advanced 13.18 points or 0.9 percent to 1,515.60.

As a result of the gains on the day, the Dow inched up by 0.1 percent for the week, while the Nasdaq fell by 0.9 percent and the S&P 500 edged down by 0.3 percent.

The strength on Wall Street came as some traders used the recent pullback as an opportunity to pick up stocks at somewhat reduced levels.

A positive reaction to quarterly results from Hewlett-Packard (HPQ) also generated some buying interest, with the tech giant jumping 12.3 percent to a six-month closing high.

After the close of trading on Thursday, HP reported fiscal first quarter earnings that fell year-over-year but exceeded analyst estimates. The company also reported better than expected revenues and forecast second quarter earnings above expectations.

Positive sentiment was also generated by easing concerns about the Federal Reserve paring back its monetary stimulus following comments from St. Louis Fed President James Bullard.

In an appearance on CNBC's "Squawk Box," Bullard said he believes that the Fed's monetary policy will "stay easy for a long time."

The markets also benefited from a rally by European stocks, which rebounded following the release of a positive German business sentiment reading.

The Ifo Institute said its business climate index rose for the fourth straight month, climbing to 107.4 in February from 104.3 in January. With the increase, the index reached a ten-month high, coming in well above economist estimates for a reading of a 104.9.

A research note from Capital Economics said the increase by Ifo index supports other recent evidence that the German economy has recovered somewhat since contracting in the fourth quarter.

Sector News

Semiconductor stocks turned in some of the market's best performances after falling sharply in the two previous sessions. The Philadelphia Semiconductor Index surged up by 2.1 percent but remains well off the ten-month closing high set on Tuesday.

Texas Instruments (TXN) helped to lead the semiconductor sector higher, with the chip maker advancing by 5.2 percent after raising its quarterly dividend by 33 percent and boosting its share buyback program by $5 billion.

Considerable strength was also visible among natural gas stocks, which moved higher along with the price of natural gas. With natural gas for March delivery climbing $0.045 to $3.291 per million BTUs, the NYSE Arca Natural Gas Index jumped by 1.9 percent.

Biotechnology stocks also saw significant strength on the day, resulting in a 1.5 percent gain by the NYSE Arca Biotechnology Index. The gain by the index came after it ended the previous session at its lowest closing level in a month.

Airline, chemical, railroad, and brokerage stocks also posted notable gains, moving back to the upside along with most of the major sectors.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher on Friday after ending the previous session sharply lower. Japan's Nikkei 225 Index rose by 0.7 percent, while Australia's All Ordinaries Index advanced by 0.8 percent.

The major European markets also showed notable moves back to the upside on the day. While the French CAC 40 Index surged up by 2.3 percent, the German DAX Index jumped by 1 percent and the U.K.'s FTSE 100 Index climbed by 0.7 percent.

In the bond market, treasuries closed modestly higher, extending the upward move seen in the previous session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, edged down by less than a basis point to 1.967 percent.

Looking Ahead

Next week, traders are likely to keep a close eye on comments from Federal Reserve Chairman Ben Bernanke, who is due to testify before congress. Traders will be looking for any indications regarding to the outlook for the Fed's monetary policy.

Trading could also be impacted by the release of key reports on new home sales, durable goods orders, and national manufacturing activity.

On the earnings front, big-name retailers such as Lowe's (LOW), Home Depot (HD), Target (TGT), Sears (SHLD) and Best Buy (BBY) are among the companies due to report their quarterly results next week.

by RTTNews Staff Writer

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