Stocks Close Notably Higher After Seeing Initial Weakness - U.S. Commentary

(RTTNews) - After coming under pressure at the start of trading on Thursday, stocks staged a substantial turnaround over the course of the trading session. The rebound came as traders shrugged off a pair of disappointing economic reports as weather-related.

The major averages moved roughly sideways going into the close, ending the session near their best levels of the day. The Dow rose 63.65 points or 0.4 percent to 16,027.59, the Nasdaq jumped 39.38 points or 0.9 percent to 4,240.67 and the S&P 500 climbed 10.57 points or 0.6 percent to 1,829.83.

The initial weakness on Wall Street was partly in reaction to a report from the Commerce Department showing an unexpected drop in retail sales in January.

The report said retail sales fell by 0.4 percent in January following a revised 0.1 percent decrease in December. Economists had expected sales to come in unchanged compared to the 0.2 percent increase originally reported for the previous month.

Excluding a steep drop in auto sales, retail sales came in unchanged in January versus a downwardly revised 0.3 percent increase in December. Ex-auto sales had been expected to edge up by 0.1 percent.

While the report showed weaker than expected January sales as well as downward revisions to the data for November and December, most economists cited the impact of poor winter weather.

Paul Dales, Senior U.S. Economist at Capital Economics, "We are not too worried by today's data as our positive outlook for employment suggests households will still have the funds to spend at a healthy rate."

A separate report from the Labor Department showed that initial jobless claims unexpectedly saw a modest increase in the week ended February 8th.

The Labor Department said initial jobless claims rose to 339,000, an increase of 8,000 from the previous week's unrevised figure of 331,000. Economists had expected claims to edge down to 330,000.

Selling pressure waned not long after the open and stocks subsequently climbed well off their worst levels. Some buying interest may have been generated by a report showing a slightly bigger than expected increase in business inventories in December.

Among individual stocks, shares of Time Warner Cable (TWC) moved sharply higher after the company agreed to be acquired by rival Comcast (CMCSA) for approximately $45.2 billion.

Tire maker Goodyear (GT) also turned in a strong performance after reporting better than expected fourth quarter earnings.

On the other hand, shares of Whole Foods (WFM) fell sharply after the grocery chain reported first quarter results that came in below analyst estimates and cut its full-year guidance.

Sector News

Gold stocks showed a substantial move to the upside on the day, more than offsetting the pullback seen in the previous session. The NYSE Arca Gold Bugs Index surged up by 3.7 percent, reaching its best closing level in over three months.

The rebound by gold stocks came amid an increase by the price of the precious metal, with gold for April delivery climbing $5.10 to $1,300.10 an ounce.

Significant strength also emerged among airline stocks, as reflected by the 1.3 percent gain posted by the NYSE Arca Airline Index. Copa Holdings (CPA), the parent of Copa Airlines, helped lead the sector higher after reporting better than expected fourth quarter results.

Biotechnology stocks also saw considerable strength on the day, driving the NYSE Arca Biotechnology Index up by 1.2 percent to a record closing high.

Tobacco, computer hardware, and utilities stocks also posted notable gains, moving higher 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 Thursday. Japan's Nikkei 225 Index tumbled by 1.8 percent, while Hong Kong's Hang Seng Index ended the day down by 0.5 percent.

Meanwhile, the major European markets ended the day mixed. While the U.K.'s FTSE 100 Index edged down by 0.2 percent, the German DAX Index rose by 0.6 percent and the French CAC 40 Index crept up by 0.2 percent.

In the bond market, treasuries moved modestly higher on the heels of the disappointing economic data. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 2.7 basis points to 2.736 percent.

Looking Ahead

Another batch of economic data may be in focus on Friday, with traders likely to keep an eye on reports on import and export prices, industrial production, and consumer sentiment.