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Stocks Close Firmly Positive On Upbeat Economic Data - U.S. Commentary

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Stocks fluctuated late in the session but managed to remain firmly positive throughout most of the trading day on Wednesday. With the upward move, the Nasdaq and the S&P 500 ended the session at their best closing levels in five and four months, respectively.

The major averages all moved to the upside on the day after ending the previous session mixed. The Dow rose 148.23 points or 0.6 percent to 25,702.89, the Nasdaq advanced 52.37 points or 0.7 percent to 7,643.41 and the S&P 500 climbed 19.40 points or 0.7 percent to 2,810.92.

The strength on Wall Street partly reflected a positive reaction to a Commerce Department report showing an unexpected increase in durable goods orders in the month of January.

The report said durable goods orders climbed by 0.4 percent in January after spiking by an upwardly revised 1.3 percent in December. Economists had expected durable goods orders to drop by 0.5 percent.

However, the increase in durable goods orders was largely due to a continued surge in orders for transportation equipment, which could nosedive in the comings months as aerospace giant Boeing (BA) deals with the second crash of one of its 737 Max 8 jets in less than six months.

Excluding the jump in orders for transportation equipment, durable goods orders edged down by 0.1 percent in January after rising by an upwardly revised 0.3 percent in December.

Ex-transportation orders had been expected to inch up by 0.1 percent, matching the uptick originally reported for the previous month.

Meanwhile, the Commerce Department said orders for non-defense capital goods excluding aircraft, a closely watched indicator of business spending, climbed by 0.8 percent in January after slumping by 0.9 percent in December.

A separate report from the Labor Department showed a modest increase in producer prices in the month of February.

The Labor Department said its producer price index for final demand inched up by 0.1 percent in February after edging down by 0.1 percent in January. Economists had expected prices to rise by 0.2 percent.

Excluding food and energy prices, core producer prices also ticked up by 0.1 percent in February after climbing by 0.3 percent in the previous months. Core prices were also expected to increase by 0.2 percent.

The report also said the annual rate of consume price growth slowed to 1.5 percent in February from 1.6 percent in November, while the annual rate of core consumer price growth edged down to 2.1 percent from 2.2 percent.

"The rebound in underlying capital goods orders in January stands out as a positive amid the recent flood of downbeat activity data, but it is still consistent with a gradual slowdown in business equipment investment growth in the first quarter," said Michael Pearce, Senior U.S. Economist at Capital Economics.

He added, "And with the February producer price figures showing that pipeline inflationary pressures remain subdued, there is still a strong case for the Fed to remain patient."

Sector News

Biotechnology stocks showed a substantial move to the upside over the course of the trading session, driving the NYSE Arca Biotechnology Index up by 2.1 percent.

Cara Therapeutics (CARA) helped lead the biotech sector higher after reporting a narrower than expected fourth quarter loss on revenues that exceeded expectations.

Significant strength was also visible among energy stocks, which moved sharply higher along with the price of crude oil.

Crude for April delivery jumped $1.39 to $58.26 a barrel following the release of a report showing an unexpected weekly drop in crude oil inventories.

Steel, healthcare, and transportation stocks also saw considerable strength on the day but managed to remain firmly in positive territory.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Wednesday. Japan's Nikkei 225 Index slumped by 1 percent, while Hong Kong's Hang Seng Index dropped by 0.4 percent.

Meanwhile, the major European markets have moved to the upside on the day. While the U.K.'s FTSE 100 Index inched up by 0.1 percent, the German DAX Index rose by 0.4 percent and the French CAC 40 Index advanced by 0.7 percent.

In the bond market, treasuries climbed off their worst levels of the day but still closed slightly lower. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, inched up by less than a basis point to 2.611 percent.

Looking Ahead

Another batch of U.S. economic data may impact trading on Thursday, with reports on weekly jobless claims, import and export prices, and new home sales likely to attract attention.

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