Easing Rate Hike Concerns Lead To Rally On Wall Street - U.S. Commentary

(RTTNews) - Reflecting a positive reaction to a slew of U.S. economic data, stocks moved sharply higher over the course of the trading session on Thursday. The rally on the day lifted the Dow and the S&P 500 well off yesterday's two-month closing lows.

The major averages closed firmly in positive territory, not far off their best levels of the day. The Dow jumped 177.71 points or 1 percent to 18,212.48, the Nasdaq soared 75.92 points or 1.5 percent to 5,249.69 and the S&P 500 jumped 21.49 points or 1 percent to 2,147.26.

The strength on Wall Street partly reflected easing concerns about a near-term interest rate hike by the Federal Reserve following the release of some weak economic data.

Before the start of trading, the Commerce Department released a report showing that retail sales fell more than expected in the month of August.

The Commerce Department said retail sales dipped by 0.3 percent in August following a revised 0.1 percent uptick in July. Retail sales had been expected to slip by 0.1 percent.

Excluding a drop in auto sales, the report said retail sales edged down by 0.1 percent in August after falling by 0.4 percent in July. Economists had expected ex-auto sales to rise by 0.3 percent.

A separate report from the Fed showed that industrial production also fell by more than expected in August amid pullbacks in manufacturing and utilities output.

The report said industrial production dropped by 0.4 percent in August after climbing by a revised 0.6 percent in July. Economists had expected production to dip by 0.2 percent.

Steve Murphy and Andrew Hunter, U.S. Economists at Capital Economics, said the weak retail sales and production data suggest third quarter GDP growth may weaker than hoped, which they said is another reason for the Fed to pass on raising interest rates next week.

"Overall, we expect GDP growth will be around 2.5% annualized in the third quarter, although the balance of risks to that forecast probably now lie to the downside," Murphy and Hunter said.

A Labor Department report showing tame producer price inflation also helped to reinforce expectations that the Fed will leave rates unchanged.

Sector News

Semiconductor stocks showed a substantial move to the upside on the day, driving the Philadelphia Semiconductor Index up by 2.3 percent. The index continued to recover after hitting a one-month intraday low on Monday.

Skyworks Solutions (SWKS) and Cavium (CAVM) turned in two of the semiconductor sector's best performances, jumping by 6.4 percent and 4.9 percent, respectively.

Considerable strength was also visible among brokerage stocks, as reflected by the 2.1 percent gain posted by the NYSE Arca Broker/Dealer Index. E*Trade (ETFC) helped to lead the sector higher, surging up by 4 percent.

Energy stocks also moved notably higher amid a rebound by the price of crude oil. Crude for October delivery climbed $0.33 to $43.91 a barrel after slumping $1.32 to $43.58 a barrel.

Telecom, computer hardware, and software stocks also saw significant strength, moving to the upside along with most of the other major sectors.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Thursday. Japan's Nikkei 225 Index slumped by 1.3 percent, while Hong Kong's Hang Seng Index climbed by 0.6 percent.

Meanwhile, the major European markets all moved to the upside over the course of the session. While the U.K.'s FTSE 100 Index advanced by 0.9 percent, the German DAX Index rose by 0.5 percent and the French CAC 40 Index inched up by 0.1 percent.

In the bond market, treasuries closed modestly lower following the rebound seen in the previous session. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, inched up by 1.4 basis points to 1.703 percent.

Looking Ahead

Reports on consumer price inflation and consumer sentiment may attract some attention on Friday, although trading activity is likely to be somewhat subdued ahead of next week's Federal Reserve meeting.