Bargain Hunting Contributes To Strong Rebound On Wall Street - U.S. Commentary

(RTTNews) - Following the sharp pullback seen over the course of the previous session, stocks showed a substantial move back to the upside on Wednesday. The gains on the day partly offset the steep drop seen over the past few sessions.

The major averages saw continued strength going into the close, ending the session near their best levels of the day. The Dow jumped 619.07 points or 4 percent to 16,285.51, the Nasdaq soared 191.05 points or 4.2 percent to 4,697.54 and the S&P 500 surged up 72.90 points or 3.9 percent to 1,940.51.

The rebound on Wall Street came as traders looked to pick up stocks at reduced levels following the downturn seen over the course of the trading day on Tuesday.

The pullback in the previous session extended the recent sell-off on Wall Street, with the Dow falling to its lowest levels since February of last year, while the Nasdaq and the S&P 500 set new ten-month lows.

In addition to bargain hunting, the markets also benefited from a report from the Commerce Department showing that durable goods orders unexpectedly increased in July.

The report said durable goods orders climbed by 2.0 percent in July after jumping by an upwardly revised 4.1 percent in June. The continued increase surprised economists, who had expected orders to drop by 0.4 percent.

Excluding a sharp increase in orders for transportation equipment, durable goods orders rose by a more modest 0.6 percent in July following a 1.0 percent increase in June.

Buying interest was also generated by comments by New York Federal Reserve President William Dudley suggesting that the central bank may delay raising interest rates.

Dudley told a press briefing the case for hiking rates at the next meeting in September is "less compelling" in light of concerns about the global economy and the recent sell-off by stocks.

However, the New York Fed President cautioned that normalization could become more compelling by the time of the meeting.

Sector News

Most of the major sectors moved notably higher on the day, reflecting broad based buying interest on Wall Street.

Electronic storage stocks showed a particularly strong move to the upside, driving the NYSE Arca Disk Drive Index up by 6.4 percent. With the gain, the index bounced well off the two-year closing low set on Tuesday.

SanDisk (SNDK), Hutchinson Technology (HTCH), and EMC Corp. (EMC) turned in some of the storage sector's best performances.

Considerable strength was also visible among oil service stocks, with the Philadelphia Oil Service Index jumping by 5.5 percent after ending the previous session at its lowest closing level in six years.

The rebound by oil service stocks came as traders went bargain hunting despite a decrease by the price of crude oil, as crude for October delivery fell $0.71 to $38.60 a barrel.

Semiconductor, internet, banking, and software stocks also saw significant strength on the day, while gold stocks were among the few groups to buck the uptrend.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in another mixed performance during trading on Wednesday. Japan's Nikkei 225 Index surged up by 3.2 percent, while Hong Kong's Hang Seng Index slumped by 1.5 percent.

Meanwhile, the major European markets all moved to the downside on the day following the rally seen on Tuesday. While the U.K.'s FTSE 100 Index plunged by 1.7 percent, the French CAC 40 Index and the German DAX Index tumbled by 1.4 percent and 1.3 percent, respectively.

In the bond market, treasuries extended the steep downward move that seen over the course of the previous session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 3.9 basis points to 2.172 percent.

Looking Ahead

Trading on Thursday may be impacted by reaction to the latest U.S. economic data, including reports on second quarter GDP, weekly jobless claims, and pending home sales.

Investors are also likely to keep an eye on any news out of the Kansas City Federal Reserve's economic symposium in Jackson Hole, Wyoming.