Stocks Climb Further Off Recent Lows On Weak Data, Microsoft - U.S. Commentary

(RTTNews) - Stocks moved mostly higher over the course of the trading day on Friday, extending the recovery off recent lows that was seen in the previous session. The markets benefited from a positive reaction to weak new home sales data and big news from Microsoft (MSFT).

While the major averages reached new highs for the session in late-day trading, they gave back ground going into the close. The Dow still ended the day up 46.77 points or 0.3 percent at 15,010.51, the Nasdaq climbed 19.09 points or 0.5 percent to 3,657.79 and the S&P 500 rose 6.54 points or 0.4 percent to 1,663.50.

The major averages turned in a mixed performance for the week, as the Dow fell by 0.5 percent, while the Nasdaq jumped by 1.5 percent and the S&P 500 rose by 0.5 percent.

The strength that emerged on Wall Street was partly due to bargain hunting following recent weakness, with the Dow and the S&P 500 continuing to regain ground after ending Wednesday's trading at their lowest closing level in well over a month.

Traders also reacted positively to a Commerce Department report showing a bigger than expected drop in new home sales in July as well as a substantial downward revision to the data for June.

The report said new home sales tumbled 13.4 percent to an annual rate of 394,000 in July from the revised June rate of 455,000.

Economists had been expecting new home sales to edge down to an annual rate of 487,000 from the 497,000 originally reported for the previous month.

The weaker than expected data offset some of the recent optimism about the housing market recovery and eased concerns about the Federal Reserve scaling back its asset purchases at its September meeting.

Joel Naroff, president of Naroff Economic Advisors, said, "While I can say that we should not make any decision based on these numbers, the FOMC will have to use them as input into their discussions."

"The confusion at the Fed is understandable," he added. "The economic data are not all pointing to strong growth ahead, which raises questions about the desirability of starting tapering sooner rather than later."

Microsoft also helped to lead the markets higher, with the software giant surging up by 7.3 percent to a one-month closing high.

The jump by Microsoft came after the company announced that Chief Executive Officer Steve Ballmer has decided to retire within the next 12 months.

Microsoft said its Board of Directors has appointed a special committee to direct the process of choosing Ballmer's successor. Sector News

Gold stocks showed a substantial move to the upside on the day, benefiting from sharp increase by the price of the precious metal. With gold for December delivery jumping $25 to $1,395.80 an ounce, the NYSE Arca Gold Bugs Index surged up by 2.8 percent.

Iamgold (IAG) and Allied Nevada Gold (ANV) turned in two of the gold sector's best performances, advancing by 5.7 percent and 5.5 percent, respectively.

With Microsoft leading the way higher, considerable strength was also visible among software stocks. The Dow Jones Software Index shot up by 2.8 percent to its best closing level in a month.

Oil, tobacco, and telecom stocks also saw notable strength on the day, moving to the upside along with most of the other major sectors.

Meanwhile, housing stocks came under pressure on the heels of the disappointing new home sales data, dragging the Philadelphia Housing Sector Index down by 1.6 percent.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Friday. Japan's Nikkei 225 Index surged up by 2.2 percent, while China's Shanghai Composite Index fell by 0.5 percent.

Meanwhile, the major European markets all moved to the upside on the day. While the U.K.'s FTSE 100 Index advanced by 0.7 percent, the French CAC 40 Index and the German DAX Index rose by 0.3 percent and 0.2 percent, respectively.

In the bond market, treasuries moved sharply higher in reaction to the disappointing new home sales data. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 8.3 basis points to 2.818 percent.

Looking Ahead

Following this week's relatively light economic calendar, several key economic reports are scheduled to be released next week.

Reports on durable goods orders, consumer confidence, pending home sales, and personal income and spending may attract attention, with the focus likely to be on how the data impacts the Fed's thinking.