Bargain Hunting, Housing Data Leads To Rally On Wall Street - U.S. Commentary

(RTTNews) - Stocks moved sharply higher over the course of the trading day on Wednesday after initially showing a lack of direction. The strong gains on the day partly offset the notable pullback seen over the two previous sessions.

The major averages ended the day firmly in positive territory, near their highs for the session. The Dow jumped 154.19 points or 0.9 percent to 17,210.06, the Nasdaq surged up 46.53 points or 1 percent to 4,555.22 and the S&P 500 climbed 15.53 points or 0.8 percent to 1,998.30.

The strength that emerged on Wall Street was partly due to bargain hunting, with traders picking up stocks at somewhat reduced levels.

With the upward move, the Nasdaq and the S&P 500 regained some ground after ending Tuesday's trading at their lowest closing levels in over a month.

Buying interest was also generated by a report from the Commerce Department showing a substantial increase in new home sales in the month of August.

The report said new home sales surged up 18.0 percent to a seasonally adjusted annual rate of 504,000 in August from the revised July rate of 427,000. Economists had been expecting new home sales to climb to an annual rate of 430,000.

With the much bigger than expected increase, new home sales reached their highest level since a matching annual rate in May of 2008.

However, Peter Boockvar, managing director at the Lindsey Group, noted that 504,000 homes sold compares with the 2005 peak of 1.389 million and a 35-year average of 687,000.

"[This] highlights the damage done but also the potential upside if the first time home buyer comes back to the market if home builders start building lower priced homes," Boockvar said.

Among individual stocks, shares of Bed Bath & Beyond (BBBY) moved notably higher after the home goods retailer reported better than expected second quarter results and provided upbeat guidance.

Media and entertainment company Starz (STRZA) also turned in a strong performance after the Wall Street Journal said the company has retained an investment banking firm to seek a possible buyer.

On the other hand, shares of KB Home (KBH) came under pressure after the homebuilder reported third quarter results that came in below analyst estimates.

Sector News

Biotechnology stocks showed a substantial move to the upside over the course of the session, driving the NYSE Arca Biotechnology Index up by 2.8 percent. With the gain, the index reached a new record closing high.

Within the biotech sector, shares of Acorda Therapeutics (ACOR) surged up by 28.2 percent after the company agreed to acquire Civitas Therapeutics for $525 million in cash.

Reflecting strength in the broader healthcare sector, the Dow Jones Healthcare Index also jumped 1.7 percent to a new record closing high.

Considerable strength was also visible among retail stocks, as reflected by the 1.4 percent gain posted by the Dow Jones Retail Index. Industry giant Wal-Mart (WMT) posted a notable gain, climbing by 2 percent.

Software, semiconductor, internet, and chemical stocks also saw significant strength, 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 on Wednesday. Japan's Nikkei 225 Index edged down by 0.2 percent, while Hong Kong's Hang Seng Index rose by 0.4 percent.

Meanwhile, the major European markets all moved to the upside on the day. While the French CAC 40 Index surged up by 1.3 percent, the German DAX Index and the U.K.'s FTSE 100 Index advanced by 0.7 percent and 0.5 percent, respectively.

In the bond market, treasuries came under pressure on the heels of a disappointing five-year note auction. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 3.4 basis points to 2.569 percent.

Looking Ahead

Economic data may attract some attention on Thursday, with traders likely to keep an eye on reports on durable goods orders and weekly jobless claims.