Stocks Move Notably Higher Amid Easing Interest Rate Worries - U.S. Commentary

(RTTNews) - After ending the previous session modestly lower, stocks showed a significant move back to the upside during trading on Wednesday. The markets benefited from easing concerns about the outlook for monetary policy and the conflicts overseas.

The major averages moved roughly sideways in afternoon trading, hovering firmly in positive territory. The Dow climbed 91.26 points or 0.6 percent to 16,651.80, the Nasdaq jumped 44.87 points or 1 percent to 4,434.13 and the S&P 500 advanced 12.97 points or 0.7 percent to 1,946.72.

The strength on Wall Street partly reflected a positive reaction to a report from the Commerce Department showing that U.S. retail sales unexpectedly came in unchanged in the month of July.

The Commerce Department said retail sales were virtually unchanged in July after edging up by 0.2 percent in June. Economists had been expecting another 0.2 percent increase.

Core retail sales, which exclude autos, gasoline, and building materials, inched up by just 0.1 percent in July following a downwardly revised 0.5 percent increase in June.

While the data suggests that spending in the third quarter got off to a slow start, the report also offset some of the recent concerns about the outlook for interest rates.

Allan von Mehren, Chief Analyst at Danske Bank, said, "After some swings in retail sales related to the weak winter sales and rebound in Q2, sales are reverting to the trend seen over the past years."

"The deceleration in growth also suggests that we should expect a moderation in ISM indices for both manufacturing and non-manufacturing over the coming 3-4 months," he added. "This may ease the pressure a little bit on the Fed."

The markets also benefited from easing geopolitical concerns despite the ongoing conflicts in Ukraine and Iraq.

However, it is worth noting that the extent of the buying interest may have been exaggerated by below average trading volume.

Sector News

Biotechnology stocks moved sharply higher over the course of the trading day, driving the NYSE Arca Biotechnology Index up by 2.2 percent. With the gain, the index ended the session at a five-month closing high.

InterMune (ITMN) helped lead the biotech sector higher, surging up by 14.4 percent after Bloomberg reported that European drug giants Sanofi (SNY) and Roche are among the bidders for the company.

Significant strength also emerged among defense stocks, as reflected by the 1.4 percent gain posted by the Philadelphia Defense Sector Index. Raytheon (RTN) and Lockheed Martin (LMT) posted standout gains on the day.

Commercial real estate stocks also turned in a strong performance, resulting in a 1.4 percent gain by the Morgan Stanley REIT Index. The gain lifted the index further off the one-month closing low set last Thursday.

Healthcare, internet, and software stocks also saw considerable strength, moving higher along with most of the other major sectors.

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 rose by 0.4 percent, while Australia's All Ordinaries Index dipped by 0.3 percent.

Meanwhile, the major European markets all moved to the upside on the day. While the German DAX Index jumped by 1.4 percent, the French CAC 40 Index advanced by 0.8 percent and the U.K.'s FTSE 100 Index rose by 0.4 percent.

In the bond market, treasuries moved moderately higher amid the easing interest rate concerns. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 2.9 basis points to a one-year closing low of 2.413 percent.

Looking Ahead

Trading on Thursday may be impacted by reaction to earnings news from Cisco Systems (CSCO), as the networking giant is releasing its fiscal fourth quarter results after the close of today's trading.

Economic news may also attract some attention, with traders likely to keep an eye on reports on weekly jobless claims and import and export prices.