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Stocks Close Sharply Higher After Recovering From Initial Drop - US Commentary

[ 14 Feb 2018 21:19 ]

WASHINGTON (Alliance News) - After initially moving to the downside, stocks moved sharply higher over the course of the trading session on Wednesday. With the strong upward move on the day, the major averages added to the gains posted in the three previous sessions.

The major averages ended the session near their best levels of the day. The Dow jumped 253.04 points or 1% at 24,893.49, the Nasdaq soared 130.10 points or 1.9% to 7,143.62 and the S&P 500 surged up 35.69 points or 1.3% to 2,698.63.

Stocks initially moved lower following the release of a report from the Labor Department showing a bigger than expected increase in consumer prices in the month of January.

The Labor Department said its consumer price index climbed by 0.5% in January after edging up by a revised 0.2% in December.

Economists had expected consumer prices to rise by 0.3% compared to the 0.1% uptick originally reported for the previous month.

Excluding food and energy prices, core consumer prices rose by 0.3% in January after inching up by 0.2% in December. Core prices had been expected to increase by 0.2%.

Compared to the same month a year ago, consumer prices were up by 2.1% in January, while core consumer prices were up by 1.8%.

"Once temporary factors drop out of the annual comparison in the spring, core CPI inflation will be close to 2.5% and we expect it to trend higher from there," said Michael Pearce, Senior US Economist at Capital Economics.

He added, "We expect that will force the Fed to raise rates a total of four times this year, beginning with a 25bp rise in interest rates at the March FOMC meeting."

A separate report from the Commerce Department showed an unexpected decrease in retail sales in the month of January.

The Commerce Department said retail sales fell by 0.3% in January compared to economist estimates for a 0.2% uptick in sales.

Revised data showed that retail sales were unchanged in December compared to the previously reported 0.4% increase.

Excluding a decrease in sales by motor vehicle and parts dealers, retail sales were unchanged in January after inching up by 0.1% in December. Ex-auto sales had been expected to climb by 0.4%.

Sector News

Gold stocks showed a substantial move to the upside on the day, driving the NYSE Arca Gold Bugs Index up by 5%. The index continues to regain ground after ending last Friday's trading at its lowest closing level in over a year.

The rally by gold stocks came amid a sharp increase by the price of the precious metal, with gold for April delivery spiking USD27.60 to USD1,358 an ounce.

Considerable strength was also visible among computer hardware stocks, as reflected by the 3% jump by the NYSE Arca Computer Hardware Index.

Biotechnology, banking, semiconductor and energy stocks also saw significant strength amid broad based buying interest on Wall Street.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Wednesday. Japan's Nikkei 225 Index fell by 0.4%, while Hong Kong's Hang Seng Index jumped by 2.3%.

Meanwhile, the major European markets all moved higher on the day. While the UK's FTSE 100 Index advanced by 0.6%, the French CAC 40 Index and the German DAX Index surged up by 1.1% and 1.2%, respectively.

In the bond market, treasuries moved significantly lower following the release of the inflation data. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, jumped by 7.3 basis points to a four-year closing high of 2.913%.

Looking Ahead

Trading on Thursday may be impacted by reaction to another batch of key economic data, including reports on producer prices, industrial production and homebuilder confidence.

On the earnings front, Cisco Systems (CSCO), Applied Materials (AMAT), Marriott (MAR), and NetApp (NTAP) are among the companies releasing their quarterly results after the close of today's trading.

Avon Products (AVP), Encana (ECA), and Waste Management (WM) are also among the companies due to report their results before the start of trading on Thursday.

Copyright RTT News/dpa-AFX


Stocks Close Sharply Higher After Recovering From Initial Drop - US Commentary - Alliance News

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