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Dow Outperforms On Upbeat Earnings News - U.S. Commentary


Stocks fluctuated over the course of the trading session on Wednesday after failing to sustain an early move to the upside. The major averages showed wild swings as the day progressed before ending the session in positive territory.

While the major averages all closed higher, the Dow outperformed its counterparts by a wide margin. The Dow climbed 171.14 points or 0.7 percent to 24,575.62, while the Nasdaq crept up 5.41 points or 0.1 percent to 7,025.77 and the S&P 500 inched up 5.80 points or 0.2 percent to 2,638.70.

The notable advance by the Dow reflected a positive reaction to quarterly results from several of the components of the blue chip index.

Tech giant IBM Corp. (IBM) posted a standout gain after reporting fourth quarter results that beat estimates and providing upbeat guidance for 2019.

Shares of United Technologies (UTX) also moved notably higher after the industrial conglomerate reported fourth quarter results that exceeded analyst estimates on both the top and bottom lines.

Consumer products giant Procter & Gamble (PG) also saw significant strength after reporting better than expected fiscal second quarter results.

Meanwhile, the volatility by the broader markets came as traders expressed uncertainty about the economic impact of the ongoing U.S. government shutdown.

In an interview with CNN, a top economic adviser to President Donald Trump acknowledged the shutdown could lead to a lack of economic growth in the first quarter.

White House Council of Economic Advisers Chairman Kevin Hassett conceded the U.S. could see zero growth if the shutdown continues for the whole quarter.

"It is true that if we get a typically weak first quarter and extended shutdown that we could end up with a number that is very low," or "very close to zero," Hassett said.

However, Hassett predicted second quarter growth would subsequently be "humongous" assuming the government reopened.

Sector News

Most of the major sectors ended the day showing only modest moves, although considerable weakness was visible among oil service stocks.

The Philadelphia Oil Service Index slumped by 2.1 percent, continuing to give back ground after reaching its best closing level in over a month last Friday.

The weakness among oil service stocks came amid a decrease by the price of crude oil, with crude for March delivery falling $0.39 to $52.62 a barrel.

Natural gas and transportation stocks also saw some weakness on the day, while notable strength emerged among utilities stocks.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a lackluster performance during trading on Wednesday. Japan's Nikkei 225 Index edged down by 0.2 percent, while China's Shanghai Composite Index inched up by 0.1 percent.

Meanwhile, the major European markets all moved to the downside over the course of the session. While the U.K.'s FTSE 100 Index slumped by 0.9 percent, the German DAX Index and the French CAC 40 Index both dipped by 0.2 percent.

In the bond market, treasuries climbed well off their worst levels but still ended the day lower. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 2.5 basis points to 2.755 percent.

Looking Ahead

Following a quiet day on the U.S. economic front, trading on Thursday may be impacted by reaction to reports on weekly jobless claims and leading economic indicators.

Earnings news is also likely to continue to attract attention, with Ford (F), Adtran (ADTN), Raymond James (RJF), Texas Instruments (TXN) and Xilinx (XLNX) among the companies releasing their quarterly results after the close of today's trading.

American Airlines (AAL), Bristol-Myers (BMY), JetBlue (JBLU), Southwest Airlines (LUV), and Union Pacific (UNP) are also among the companies due to report their results before the start of trading on Thursday.

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