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Major Averages Reach Best Closing Levels In A Month - U.S. Commentary


Stocks moved mostly higher over the course of the trading day on Wednesday, adding to the gains posted in the previous session. With the continued upward move, the major averages reached their best closing levels in a month.

The major averages ended the day in positive territory but well off their highs of the session. The Dow climbed 141.57 points or 0.6 percent to 24,207.16, the Nasdaq rose 10.86 points or 0.2 percent to 7,034.69 and the S&P 500 edged up 5.80 points or 0.2 percent to 2,616.10.

The continued strength on Wall Street partly reflected a positive reaction to upbeat earnings news from financial giants Bank of America (BAC) and Goldman Sachs (GS).

Shares of Bank of America moved sharply higher trading after the company reported fourth quarter results that beat analyst estimates on both the top and bottom lines.

Goldman Sachs also saw substantial strength after reporting fourth quarter earnings and revenues that exceeded expectations.

Buying interest was somewhat subdued, however, as traders continued to express uncertainty about the ongoing government shutdown.

Stocks remained mostly positive after British Prime Minister Theresa May's government survived a vote of no confidence in parliament.

The U.K.'s House of Commons defeated the motion raised by the leader of the main opposition Labour party Jeremy Corbyn by a vote of 325 to 306. The no-confidence vote came a day after May's Brexit deal was voted down 432 to 202.

The Federal Reserve also released its Beige Book this afternoon, with the report saying economic activity has continued to increase in most of the U.S. but also hinting at a deterioration in optimism.

The Beige Book, a compilation of anecdotal evidence on economic conditions in the twelve Fed districts, said eight of the twelve districts reported modest to moderate growth.

Looking ahead, the Beige Book said outlooks generally remained positive, although many districts reported that contacts had become less optimistic.

The drop in optimism reflected increased financial market volatility, rising short-term interest rates, falling energy prices, and elevated trade and political uncertainty.

In other U.S. economic news, the Labor Department released a report showing another steep drop in import prices in the month of December, reflecting a continued nosedive in fuel prices

The Labor Department said import prices tumbled by 1.0 percent in December after plunging by a revised 1.9 percent in November.

Economists had expected import prices to plummet by 1.3 percent compared to the 1.6 percent slump originally reported for the previous month.

The report said export prices also fell by 0.6 percent in December after sliding by a revised 0.8 percent in November. The drop in export prices matched economist estimates.

A separate report from the National Association of Home Builders showed an unexpected improvement in homebuilder confidence in January.

The report said the NAHB/Wells Fargo Housing Market Index rose to 58 in January after slumping to 56 in December. Economists had expected the index to come in unchanged.

The notable decrease seen in the previous month dragged the housing market index down its lowest level since hitting 54 in May of 2015.

Sector News

Financial stocks turned in some of the market's best performances on the day following the results from industry giants Bank of America and Goldman Sachs.

Reflecting the strength in the financial sector, the NYSE Arca Broker/Dealer Index and the KBW Bank Index surged up by 2.9 percent and 2.5 percent, respectively.

Notable strength was also visible among steel stocks, resulting in a 1.1 percent advance by the NYSE Arca Steel Index.

On the other hand, computer hardware stocks came under considerable selling pressure, dragging the NYSE Arca Computer Hardware Index down by 1.9 percent.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Wednesday. Japan's Nikkei 225 Index fell by 0.6 percent, while Hong Kong's Hang Seng Index rose by 0.3 percent.

The major European markets also ended the day mixed. While the U.K.'s FTSE 100 Index dropped by 0.5 percent, the German DAX Index and the French CAC 40 Index climbed by 0.4 percent and 0.5 percent, respectively.

In the bond market, treasuries moved to the downside after ending the previous session roughly flat. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is rose by 2 basis points at 2.731 percent.

Looking Ahead

Trading on Thursday may be impacted by reaction to reports on weekly jobless claims and Philadelphia-area manufacturing activity.

On the earnings front, Alcoa (AA), CSX Corp. (CSX), and Kinder Morgan (KMI) are among the companies releasing their quarterly results after the close of today's trading.

KeyCorp (KEY), M&T Bank (MTB), and Morgan Stanley (MS) are also among the companies due to report their results before the start of trading on Thursday.

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