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Upbeat Earnings News Leads To Strength On Wall Street - U.S. Commentary


After seeing considerable volatility throughout the previous session, stocks moved mostly higher over the course of the trading day on Tuesday. With the upward move, the markets further offset the sharp pullback that was seen last Friday.

The major averages moved roughly sideways throughout the afternoon, hovering firmly in positive territory. The Dow ended the day up 86.63 points or 0.5 percent at 16,535.37, the Nasdaq climbed 29.14 points or 0.7 percent to 4,103.54 and the S&P 500 rose 8.90 points or 0.5 percent to 1,878.33.

The strength on Wall Street partly reflected a positive reaction to earnings news from big-name companies such as Sprint (S) and Merck (MRK).

Shares of Sprint surged up by 11.3 percent after the wireless carrier reported a narrower than expected first quarter loss and provided upbeat guidance.

Drug giant Merck also moved notably higher after reporting adjusted first quarter earnings that came in well above analyst estimates.

Not all of the earnings news was good, however, with shares of Goodyear (GT) falling sharply after the tire maker reported weaker than expected first quarter results.

A report from the Conference Board showing a modest deterioration in U.S. consumer confidence in the month of April also helped to limit the upside for the markets.

The Conference Board said its consumer confidence index dipped to 82.3 in April from an upwardly revised 83.9 in March. Economists had expected the index to climb to 83.0 from the 82.3 originally reported for the previous month.

While the consumer confidence index decreased compared to the previous month's upwardly revised reading, it is still at its second best level since January of 2008.

Traders also seemed somewhat reluctant to make significant moves as the Federal Reserve's two-day monetary policy meeting got underway.

With the Fed widely expected to announce another $10 billion reduction in the pace of its asset purchases on Wednesday, traders will be looking for signs regarding the outlook for interest rates.

Sector News

Biotechnology stocks showed a substantial move to the upside over the course of the trading day, driving the NYSE Arca Biotechnology Index up by 3 percent. Despite the strong gain, the index remained stuck in a recent trading range.

Incyte (INCY), Regeneron (REGN), and United Therapeutics (UTHR) turned in some of the biotech sector's best performances.

Considerable strength also emerged among gold stocks, as reflected by the 1.5 percent gain posted by the NYSE Arca Gold Bugs Index. The gains by gold stocks came despite a modest decrease by the price of the precious metal.

Telecom stocks also saw significant strength, resulting in a 1.6 percent gain by the NYSE Arca Telecom Index. While Sprint led the sector higher, Level 3 (LVLT) and Frontier (FTR) also posted strong gains.

Airline, networking, and tobacco stocks also moved notably higher on the day, moving to the upside along with most of the other major sectors.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Tuesday. Japan's Nikkei 225 Index slumped by 1 percent, while Hong Kong's Hang Seng Index surged up by 1.5 percent.

Meanwhile, the major European markets all moved notably higher on the day. While the German DAX Index jumped by 1.5 percent, the U.K.'s FTSE 100 Index advanced by 1 percent and the French CAC 40 Index rose by 0.8 percent.

In the bond market, treasuries closed modestly lower but well off their worst levels of the session. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, crept up by 1.8 basis points to 2.695 percent.

Looking Ahead

Trading activity on Wednesday may be somewhat subdued in the lead up to the Fed's monetary policy announcement at approximately 2 pm ET.

The announcement from the Fed may overshadow the release of reports on private sector employment and first quarter GDP.

Nonetheless, eBay (EBAY), Twitter (TWTR) and Marriott (MAR) are likely to be in focus after releasing their quarterly results after the close of today's trading.

by RTTNews Staff Writer

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