Stocks Close Firmly Positive Following Last Week's Pullback - U.S. Commentary

(RTTNews) - After showing a notable move to the downside last week, stocks regained some ground during trading on Monday. While buying interest waned after an initial rally, the markets maintained a positive bias throughout the trading session.

The major averages moved roughly sideways throughout the afternoon, holding on to strong gains. The Dow advanced 129.21 points or 0.8 percent to 15,884.57, the Nasdaq climbed 28.54 points or 0.7 percent to 4,029.52 and the S&P 500 rose 11.22 points or 0.6 percent to 1,786.54.

The strength on Wall Street was partly due to bargain hunting following the weakness seen last week, which dragged the Dow and the S&P 500 down to their lowest levels in a month.

Buying interest was also generated by the release of some strong economic data from overseas, including an upbeat report on European private sector activity.

Meanwhile, traders also digested the latest batch of U.S. economic data, with a report from the Federal Reserve showing that industrial production rose by much more than expected in the month of November.

The report said industrial production surged up by 1.1 percent in November compared to economist estimates for an increase of about 0.6 percent.

A separate report from the New York Fed showed that its index of regional manufacturing activity returned to positive territory in December, while the Labor Department reported an upward revision to third quarter productivity growth.

While the largely positive data led some economists to predict that the Fed will began scaling back its asset purchases at its monetary policy meeting this week, traders seemed to shrug off recent concerns about the outlook for the stimulus program.

Joel Naroff, President and Chief Economist at Naroff Economic Advisors, said, "The data have turned fairly consistently stronger and the Fed is likely to start the process of getting out of the quantitative easing business by the end of the winter."

"Whether the start date is this Wednesday (I don't think so but it is possible) or next year at either the January or March meeting is unclear, but it is coming," he added.

The Fed is scheduled to begin its two-day monetary policy meeting on Tuesday and announce its decision Wednesday afternoon.

Sector News

Networking stocks saw considerable on the day, resulting in a 1.6 percent gain by the NYSE Arca Networking Index. Despite the increase, the index remains well off the two-year highs set last Monday.

Arris Group (ARRS), Polycom (PLCM) and Cisco (CSCO) turned in some of the networking sector's best performances.

Significant strength was also visible among semiconductor stocks, as reflected by the 1.3 percent gain posted by the Philadelphia Semiconductor Index. The index regained some ground after closing lower for four consecutive sessions.

LSI Corp. (LSI) helped lead the semiconductor sector higher after agreeing to be acquired by Avago Technologies (AVGO) for $6.6 billion in cash. Shares of LSI jumped 38.6 percent.

Oil service, defense, and computer hardware stocks also moved notably higher on the day, moving to the upside along with most of the other major sectors.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Monday. Japan's Nikkei 225 Index tumbled by 1.6 percent, while Hong Kong's Hang Seng Index ended the day down by 0.6 percent.

Meanwhile, the major European markets showed strong moves to the upside on the day. The U.K.'s FTSE 100 Index jumped by 1.3 percent, while the French CAC 40 Index and the German DAX Index surged up by 1.5 percent and 1.7 percent, respectively.

In the bond market, treasuries turned lower over the course of the session after failing to sustain an early upward move. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, edged up by less than a basis point to 2.877 percent after hitting a low of 2.839 percent.

Looking Ahead

Trading on Tuesday may be impacted by the release of reports on consumer prices and homebuilder confidence, although activity is likely to be subdued as traders await the Fed decision.