Stocks Close Firmly Positive Ahead Of Fed Announcement - U.S. Commentary

(RTTNews) - Stocks moved notably higher over the course of the trading day on Wednesday after initially showing a lack of direction. The gains on the day extended the rally seen in the previous session, with the major averages reaching their best levels in almost a month.

The major averages ended the day firmly in positive territory, just off their highs for the session. The Dow climbed 140.10 points or 0.8 percent to 16,739.95, the Nasdaq rose 28.72 points or 0.6 percent to 4,889.24 and the S&P 500 advanced 17.22 points or 0.9 percent to 1,995.31.

The strength that emerged on Wall Street seemed to reflect optimism about the outlook for interest rates ahead of tomorrow's monetary policy announcement by the Federal Reserve.

While analysts remain split on whether the Fed will raise rates, a Labor Department report showing tame inflation may have provided further support for the view that the central bank will leave rates at record lows.

The report said consumer prices in August were up by just 0.2 percent compared to the same month a year ago, unchanged from the previous month and well below the Fed's 2 percent target.

The report said the annual rate of growth in core consumer prices, which exclude food and energy prices, was also unchanged at 1.8 percent.

Rob Carnell, chief international economist at ING, said, "This result doesn't even give a directional boost to the hawks, which might have been the case if energy had dragged just a little less."

"That said, this was never likely to be a decisive piece of data, and the FOMC members will probably go into this meeting already with a good idea of what they want to do," he added.

Meanwhile, the National Association of Home Builders released a separate report showing a continued improvement in homebuilder confidence in the month of September.

The report said the NAHB/Wells Fargo Housing Market Index crept up to 62 in September from 61 in August, while economists had expected the index to come in unchanged.

With the unexpected uptick, the housing market index reached its highest level since hitting 68 in October of 2005.

Sector News

Most of the major sectors moved to the upside on the day, although gold stocks posted particularly strong gains. The NYSE Arca Gold Bugs Index soared 6.5 percent after ending the previous session at its lowest closing level in over a month.

The rally by gold stocks came amid a notable increase by the price of the precious metal, with gold for December delivery climbing $16.40 to $1,119 an ounce.

Significant strength was also visible among energy stocks, which moved higher along with the price of crude oil. Crude for October delivery surged up $2.56 to $47.15 a barrel.

The sharp jump by the price of oil came after a government report showed that crude oil inventories fell by 2.1 million barrels in the week ended September 11th.

Steel, railroad, computer hardware, and chemical stocks also saw considerable strength amid the broad based strength that emerged on Wall Street.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Wednesday. Japan's Nikkei 225 Index advanced by 0.8 percent, while Hong Kong's Hang Seng Index surged up by 2.4 percent.

The major European markets also moved to the upside on the day. While the German DAX Index rose by 0.4 percent, the U.K.'s FTSE 100 Index and the French CAC 40 Index jumped by 1.5 percent and 1.7 percent, respectively.

In the bond market, treasuries closed modestly lower, extending the steep drop seen in the previous session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 2.2 basis points to 2.303 percent.

Looking Ahead

The Fed is likely to be in focus throughout the trading session on Thursday, overshadowing reports on weekly jobless claims, housing starts and Philadelphia-area manufacturing activity.