Stocks Close Mostly Higher For Second Consecutive Session - U.S. Commentary

(RTTNews) - After ending the previous session moderately higher, stocks saw some further upside over the course of the trading day on Wednesday. With the gains, the major averages closed higher for the fourth time in the last five sessions.

The major averages moved roughly sideways in afternoon trading, hovering firmly in positive territory. The Dow rose 96.91 points or 0.7 percent to 14,930.87, the Nasdaq climbed 36.43 points or 1 percent to 3,649.04 and the S&P 500 advanced 13.31 points or 0.8 percent to 1,653.08.

The strength that emerged on Wall Street came as stocks continued to recover from the sell-off that was seen last Tuesday, which pulled the Dow down to a two-month closing low.

Traders continued to pick up stocks at reduced levels, although the major averages remain well off the highs set early last month.

Positive sentiment was also generated by news that major automakers reported double digit growth in U.S. vehicle sales in the month of August.

General Motors (GM) and Toyota (TM) saw their August U.S. sales jump 14.7 percent and 22.8 percent, respectively, while Ford (F) and Chrysler both reported sales the surged up by about 12 percent.

On the economic front, the Commerce Department released a report before the start of trading showing that the U.S. trade deficit widened in July.

The report said the trade deficit widened to $39.1 billion in July compared to a revised $34.5 billion deficit in June. Economists had expected the deficit to widen to $39.0 billion from the $34.2 billion originally reported for the previous month.

Despite the revision, the trade deficit recorded for June still represents the narrowest U.S. trade deficit since October of 2009.

Late in the trading day, the Federal Reserve also released its Beige Book, a compilation of anecdotal evidence on economic conditions from each of the twelve Fed districts.

The Beige Book said national economic activity continued to expand at a modest to moderate pace during the reporting period from early July through late August.

Most districts also reported increases in consumer spending as well as hiring that held steady or increased somewhat, the report said.

Nonetheless, lingering concerns about the situation in Syria may have kept buying interest somewhat subdued amid signs of growing Congressional support for President Obama's plan for military action.

Sector News

Networking stocks turned in some of the market's best performances on the day, driving the NYSE Arca Networking Index up by 3 percent. The index continued to regain ground after ending last Friday's trading at its lowest closing level in over a month.

Ciena (CIEN) helped to lead the networking sector higher, with the telecom equipment maker surging up by 13.8 percent after reporting better than expected third quarter results.

Significant strength was also visible among semiconductor stocks, as reflected by the 2.6 percent gain posted by the Philadelphia Semiconductor Index. Cirrus Logic (CRUS), Lam Research (LRCX) and KLA-Tencor (KLAC) posted notable gains.

Biotechnology stocks also turned in a strong performance, resulting in 2.1 percent advance by the NYSE Arca Biotechnology Index. The gain lifted the index to its best closing level in a month.

Brokerage, oil service, and railroad stocks also saw considerable strength on the day, moving higher along with most of the other major sectors.

Within the brokerage sector, E*Trade (ETFC) posted a standout gain after announcing that its E*TRADE Bank subsidiary has received regulatory approval to dividend capital to the parent company.

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 rose by 0.5 percent, while Hong Kong's Hang Seng Index ended the day down by 0.3 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 inched up by 0.1 percent, the German DAX Index and the French CAC 40 Index both edged up by 0.2 percent.

In the bond market, treasuries came under pressure as the day progressed, adding to the steep losses posted in the previous session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 4.9 basis points to 2.897 percent.

Looking Ahead

A slew of economic data is scheduled to be released on Thursday, including reports on private sector employment, weekly jobless claims, and service sector activity.

Reaction to the data may be somewhat subdued, however, as traders are likely to be looking ahead to release of the closely watched monthly jobs report on Friday.