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Stocks Close Modestly Higher After Late-Day Volatility - U.S. Commentary


Stocks fluctuated late in the trading session on Tuesday but managed to finish the day modestly higher. With the uptick on the day, the Dow and the Nasdaq ended the session at their best closing levels in over six months.

The S&P 500 briefly dipped into negative territory in late-day trading but ended the session up 1.48 points or 0.1 percent to 2,907.06. The Dow climbed 67.89 points or 0.3 percent to 26,452.66 and the Nasdaq rose 24.21 points or 0.3 percent to 8,000.23.

Early buying interest was generated in reaction to earnings news from Dow components Johnson & Johnson (JNJ) and UnitedHealth (UNH).

Healthcare giant Johnson & Johnson ended the day up by 1.1 percent after reporting first quarter results that exceeded analyst estimates and boosting its forecast for full-year sales growth.

On the other hand, shares of UnitedHealth pulled back after an initial jump even though the health insurer reported better than expected first quarter results and raised its full-year earnings guidance.

Financial giant Bank of America (BAC) ended the day little changed after reporting first quarter earnings that beat estimates but weaker than expected revenues.

The early buying interest was partly offset by a report from the Federal Reserve showing industrial production unexpectedly edged lower in the month of March.

The report said industrial production dipped by 0.1 percent in March after inching up by 0.1 percent in February. Economists had expected production to rise by 0.2 percent.

Paul Ashworth, Chief U.S. Economist at Capital Economics, noted the dip in industrial production in March completed a "weak first quarter in which industrial production contracted by 0.3% annualized, as the U.S. factory sector succumbed to the global manufacturing malaise."

Meanwhile, a separate report from the National Association of Home Builders showed a modest improvement in U.S. homebuilder confidence in the month of April.

The report said the NAHB/Wells Fargo Housing Market Index inched up to 63 in April after holding at 62 in March, with the uptick matching expectations.

"Builders report solid demand for new single-family homes but they are also grappling with affordability concerns stemming from a chronic shortage of construction workers and buildable lots," said NAHB Chairman Greg Ugalde.

Sector News

Semiconductor stocks moved sharply higher over the course of the trading session, driving the Philadelphia Semiconductor Index up by 3.2 percent to a record closing high.

Communications chip maker Qualcomm (QCOM) spiked in afternoon trading after settling a royalty dispute with Apple (AAPL).

Significant strength also emerged among financial stocks, with the KBW Bank Index and the NYSE Arca Broker/Dealer Index climbing by 1.6 percent and 1.5 percent, respectively.

Oil service stocks also move notably higher on the day, while commercial real estate, gold, and healthcare stocks showed substantial moves to the downside.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Tuesday. Japan's Nikkei Index crept up by 0.2 percent, while China's Shanghai Composite Index soared by 2.4 percent.

The major European markets also moved to the upside on the day. While the German DAX Index climbed by 0.7 percent, the U.K.'s FTSE 100 Index and the French CAC 40 Index both rose by 0.4 percent.

In the bond market, treasuries moved notably lower after ending the previous session roughly flat. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, climbed by 3.9 basis points to a nearly one-month high of 2.592 percent.

Looking Ahead

Trading on Wednesday is likely to continue to be driven by reaction to earnings news, with IBM Corp. (IBM), Netflix (NFLX), CSX Corp. (CSX) and United Continental (UAL) among the companies releasing their quarterly results after the close of today's trading.

Abbott Labs (ABT), Ericsson (ERIC), Morgan Stanley (MS), and PepsiCo (PEP) are also among the companies due to report their results before the start of trading on Wednesday.

A report on the U.S. trade deficit may also attract attention along with the Fed's Beige Book, a compilation of anecdotal evidence on economic conditions in the twelve Fed districts.

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