Stocks Close Sharply Higher Following Late-Day Rally - U.S. Commentary

(RTTNews) - After fluctuating throughout much of the session, stocks showed a strong move to the upside in afternoon trading on Thursday. The late-day rally helped the markets recover from the sell-off that was seen over the course of the two previous sessions.

The major averages ended the session just off their best levels of the day. The Dow jumped 225.48 points or 1.3 percent to 17,416.85, the Nasdaq surged up 45.41 points or 1 percent to 4,683.41 and the S&P 500 advanced 19.09 points or 1 percent to 2,021.25.

The strength that emerged on Wall Street was partly attributed to comments Federal Reserve Chair Janet Yellen reportedly made to a group of Senate Democrats at a private luncheon.

While Yellen told the lawmakers the U.S. economy is strong, she apparently expressed some concerns about the situation in Europe.

The Fed's monetary policy statement issued yesterday indicated that the central bank will include international developments as part of its assessment of when to raise interest rates.

Yellen's remarks subsequently seemed to ease concerns about the outlook for rates, which contributed to the pullback seen on Wednesday.

Positive sentiment may also have been generated by a report from the Labor Department showing that initial jobless claims fell to a fourteen-year low in the week ended January 24th.

The report said initial jobless claims tumbled to 265,000, a decrease of 43,000 from the previous week's revised level of 308,000.

While claims fell to their lowest level since April of 2000, the Labor Department said the sharp pullback was partly due to seasonal issues around the Martin Luther King, Jr. Day holiday.

Meanwhile, a separate report released by the National Association of Realtors unexpectedly showed a sharp drop in U.S. pending home sales in the month of December.

NAR said its pending home sales index tumbled 3.7 percent to 100.7 in December, while economists had expected the index to climb by 0.5 percent.

A pending home sale is one in which a contract was signed but not yet closed. Normally, it takes four to six weeks to close a contracted sale.

Sector News

Airline stocks performed well throughout much of the trading session, driving the NYSE Arca Airline Index up by 2.9 percent. With the gain, the index climbed back toward the twelve-year closing high it set on Monday.

JetBlue (JBLU) helped to lead the sector higher, with the discount airline soaring by 8.8 percent after reporting better than expected fourth quarter earnings.

Considerable strength also emerged among housing stocks, as reflected by the 2.1 percent gain posted by the Philadelphia Housing Sector Index. Meritage Homes (MTH) posted a standout gain after reporting fourth quarter earnings that exceeded analyst estimates.

Software stocks also saw significant strength on the day, regaining some ground after helping to lead the markets lower in the two previous sessions. The Dow Jones Software Index surged up by 1.5 percent, bouncing off a three-month closing low.

Financial, chemical, and utilities stocks also moved notably higher over the course of the trading day, while weakness remained visible among telecom, oil service, and gold stocks.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower on Thursday following the overnight weakness on Wall Street. Japan's Nikkei 225 Index and Hong Kong's Hang Seng Index both ended the day down by 1.1 percent.

Meanwhile, the major European markets turned in a mixed performance on the day. While the U.K.'s FTSE 100 Index edged down by 0.2 percent, the German DAX Index and the French CAC 40 Index rose by 0.3 percent and 0.4 percent, respectively.

In the bond market, treasuries gave back some ground after ending the previous session sharply higher. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 2.7 basis points to 1.751 percent.

Looking Ahead

Trading on Friday may be impacted by the release of a slew of U.S. economic data, including reports on fourth quarter GDP, consumer sentiment, and Chicago-area business activity.

Earnings news may also be in focus, with Google (GOOG), Amazon (AMZN), and Visa (B) among the companies releasing their quarterly results after the close of today's trading.

Chevron (CVX), MasterCard (MA), Mattel (MAT), and Tyson Foods (TSN) are also among those due to report their results before the start of trading on Friday.