Stocks Close Sharply Higher In Reaction To Fed Minutes - U.S. Commentary

(RTTNews) - With traders reacting positively to the minutes of the latest Federal Reserve meeting, stocks moved sharply higher during trading on Wednesday. The rally on the day largely offset the sell-off that was seen in the previous session.

The major averages continued to perform well going into the close, ending the session near their best levels. The Dow jumped 274.83 points or 1.6 percent to 16,994.22, the Nasdaq soared 83.39 points or 1.9 percent to 4,468.59 and the S&P 500 surged up 33.79 points or 1.8 percent to 1,968.89.

The strength that emerged on Wall Street came as the minutes of the Fed's September meeting were seen as offering a dovish outlook for monetary policy.

The minutes showed that some Fed officials expressed concerns about global economic weakness and the impact of a stronger U.S. dollar.

Suggestions that the appreciation of the dollar might slow an anticipated increase in inflation also helped offset concerns about the central bank raising interest rates sooner than anticipated.

At the same time, the minutes showed that some members were concerned that the Fed's reference to leaving rates unchanged for a "considerable time" after its asset purchase program ends could be misunderstood as a commitment rather than as data dependent.

Most participants subsequently indicated a preference for clarifying the dependence of the current forward guidance on economic data.

Peter Boockvar, chief market analyst at the Lindsey Group, said, "Bottom line, there are a lot of differing opinions in the minutes and we can all take out what suits us, but markets love any hint that the doves are in control and they certainly got that continued sense within the minutes."

Stocks showed a lack of direction earlier in the session as traders looked ahead to the Fed minutes as well as the release of quarterly results from aluminum giant Alcoa (AA).

Alcoa is releasing its third quarter results after the close of today's trading, marking the unofficial start of earnings season.

Sector News

After falling sharply over the course of the past month, gold stock showed a substantial move back to the upside on the day. The NYSE Arca Gold Bugs Index surged up by 7.6 percent, bouncing off yesterday's nearly six-year closing low.

The rebound by gold stocks came as the price of the precious metal moved notably higher in electronic trading in reaction to the Fed minutes.

Biotechnology stocks also saw significant strength on the day, driving the NYSE Arca Biotechnology Index up by 2.8 percent. Strong gains by Exact Sciences (EXAS) and Alexion (ALXN) helped lift the index off its worst closing level in over a month.

Considerable strength was also visible among interest rate-sensitive utilities stocks, as reflected by the 2.3 gain posted by the Dow Jones Utilities Average. Exelon (EXC), FirstEnergy (FE) and ConEd (ED) posted strong gains.

Semiconductor, software, commercial real estate, and banking stocks also saw notable strength, while airline stocks were among the few groups to buck the uptrend.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Wednesday. Japan's Nikkei 225 Index slumped by 1.2 percent, while Hong Kong's Hang Seng Index dropped by 0.7 percent.

The major European markets also moved to the downside on the day. While the U.K.'s FTSE 100 Index edged down by 0.2 percent, the French CAC 40 Index and the German DAX Index both fell by 1 percent.

In the bond market, treasuries closed moderately higher after seeing considerable volatility. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, dipped by 2 basis points to 2.33 percent, its lowest closing level in over a year.

Looking Ahead

Following several quiet days on the U.S. economic front, traders are likely to keep an eye on the Labor Department's weekly jobless claims report on Thursday.

Trading could also be impacted by reaction to Alcoa's quarterly results, which may help set the tone for the impending earnings season.