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Stocks Moving Sharply Higher Following Upbeat Housing Data - U.S. Commentary

wallstreet 121514 24May16

Stocks have moved sharply higher in early trading on Tuesday after ending the previous session modestly lower. The major averages have climbed firmly into positive territory, more than offsetting the slim losses posted on Monday.

In recent trading, the major averages have seen some further upside, reaching new highs for the young session. The Dow is up 214.43 points or 1.2 percent at 17,707.36, the Nasdaq is up 74.85 points or 1.6 percent at 4,830.63 and the S&P 500 is up 25.12 points or 1.2 percent at 2,073.16.

The early strength on Wall Street may be partly due to bargain hunting, with traders picking up stocks at reduced levels following recent weakness.

With the gains on the day, the major averages continue to regain ground after falling to their lowest levels in about two months last Thursday.

Positive sentiment has also been generated by the release of a Commerce Department report showing a sharp jump in new home sales in the month of April.

The Commerce Department said new home sales surged up by 16.6 percent to an annual rate of 619,000 in April from a revised 531,000 in March.

Economists had expected new home sales to climb by 2.3 percent to a rate of 523,000 from the 511,000 originally reported for the previous month.

With the much bigger than expected increase, new home sales reached their highest level since hitting 627,000 in January of 2008.

Brokerage stocks have shown a substantial move to the upside on the day, driving the NYSE Arca Broker/Dealer Index up by 2.5 percent. The gain has lifted the index to its best intraday level in almost a month.

Significant strength is also visible among housing stocks, which have benefited from the much better than expected new home sales data. Reflecting the strength in the sector, the Philadelphia Housing Sector Index has surged up by 2.1 percent.

Software, semiconductor, banking and telecom stocks are also seeing considerable strength, while gold stocks are among the few groups bucking the uptrend.

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Tuesday. Japan's Nikkei 225 Index slumped by 0.9 percent, while China's Shanghai Composite Index slid by 0.8 percent.

Meanwhile, the major European markets have moved sharply higher on the day. While the U.K.'s FTSE 100 Index is up by 1.3 percent, the German DAX Index is up by 2.2 percent and the French CAC 40 Index is up by 2.4 percent.

In the bond market, treasuries have come under pressure amid the rally on Wall Street. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 4.2 basis points at 1.88 percent.

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