Stocks moved mostly higher over the course of the trading day on Tuesday after seeing some volatility in morning trading. With the upward move on the day, the major averages partly offset the steep losses posted in the previous session.
The major averages ended the day firmly in positive territory but well off their recent highs. The Dow advanced 115.96 points or 0.8 percent to 13,900.13, the Nasdaq rose 13.40 points or 0.4 percent to 3,129.65 and the S&P 500 climbed 9.09 points or 0.6 percent to 1,496.94.
The volatility that was seen during morning trading came as Federal Reserve Chairman Ben Bernanke testified before the Senate Banking Committee.
In his prepared remarks, Bernanke noted that the Fed's highly accommodative monetary policy has several potential costs and risks, including leading to higher inflation.
However, he said the Fed is closely monitoring the potential risks and said they are outweighed by the benefits of promoting a stronger economic recovery and more-rapid job creation.
Bernanke also expressed concerns about the automatic spending cuts due to go into effect at the end of the month, indicating that the cuts could be a significant near-term burden on the economy recovery.
While Bernanke's remarks were seen as a reflective of the changing conversation within the Fed, James Knightley, senior economist at ING, said the central bank is unlikely to announce a shift in monetary policy at its March meeting due to the economic risks from the sequester.
"Furthermore, the newsflow from Italy highlights the fact that the Eurozone story is still far from resolved, which suggests it is not just domestic risks that the Fed has to follow," Knightley said.
Stocks moved mostly higher following the end of Bernanke's testimony as traders turned their attention to upbeat reports on new home sales and consumer confidence
The Commerce Department said new home sales surged up by 15.6 percent to a seasonally adjusted annual rate of 437,000 in January from the revised December rate of 378,000. With the increase, sales rose to their highest rate since July of 2008.
Economists had been expecting new home sales to show a much more modest increase to an annual rate of 381,000 from the 369,000 originally reported for the previous month.
A separate report from the Conference Board showed that its consumer confidence index jumped to 69.6 in February from a revised 58.4 in January. Economists had been expecting the index to climb to 61.0 from the 58.6 that had been reported for the previous month.
After turning in some of the market's worst performances on Tuesday, housing stocks showed a strong move back to the upside on the heels of the new home sales data. The Philadelphia Housing Sector Index surged up by 3.2 percent, bouncing off a nearly two-month closing low.
Hovnanian Enterprises (HOV) helped to lead the sector higher, jumping by 11.4 percent, while Standard Pacific (SPF) and KB Home (KBH) also posted notable gains.
Electronic storage stocks also saw considerable strength after ending the previous session sharply, with the NYSE Arca Disk Drive Index advancing by 1.5 percent. The gain by the index came it fell by 2.6 percent on Tuesday to its worst closing level in over two months.
Significant strength was also visible among gold stocks, which moved higher along with the price of the precious metal. With gold for April delivery jumping $28.90 to $1,615.50 an ounce, the NYSE Arca Gold Bugs Index rose by 1.4 percent.
Natural gas, oil service, and retail stocks also showed notable moves to the upside after coming under considerable selling pressure in the previous session.
In overseas trading, stock markets across the Asia-Pacific region moved sharply lower during trading on Tuesday following the overnight weakness on Wall Street. Japan's Nikkei 225 Index tumbled by 2.3 percent, while Hong Kong's Hang Seng Index fell by 1.3 percent.
The major European markets also showed significant moves to the downside on the day. While the U.K.'s FTSE 100 Index slid by 1.3 percent, the German DAX Index and the French CAC 40 Index plummeted by 2.3 percent and 2.7 percent, respectively.
In the bond market, treasuries ended the session modestly higher but well off their best levels. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, edged down by 1.6 basis points to 1.879 percent after hitting a low of 1.843 percent.
Another day of Congressional testimony from Bernanke may attract attention on Wednesday, with the Fed Chief due to appear before the House Financial Services Committee.
Traders are also likely to keep an eye on a pair of economic reports on durable goods orders and pending home sales in the month of January.
On the earnings front, retail giant Target (TGT) is among the companies scheduled to release their quarterly results before the start of trading on Wednesday.
by RTT Staff Writer
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