Stocks Pulls Back Off Highs But Still Close Firmly Positive - U.S. Commentary

(RTTNews) - Stocks gave back some ground after moving notably higher in early trading but managed to maintain a positive bias during trading on Tuesday. The gains on the day helped the markets kick off the new year on a positive note.

The major averages moved to the upside going into the close to end the day firmly in positive territory. The Dow rose 119.16 points or 0.6 percent to 19,881.76, the Nasdaq advanced 45.97 points or 0.9 percent to 5,429.08 and the S&P 500 climbed 19.00 points or 0.9 percent to 2,257.83.

The early strength on Wall Street came on the heels of the three-day losing streak that was seen to close out the previous year.

Despite the pullback, the major averages posted strong gains for 2016. The Dow soared by 13.4 percent, the Nasdaq surged up by 7.5 percent and the S&P 500 jumped by 9.5 percent.

Positive sentiment was also generated by the release of some upbeat economic data, including a report from the Institute for Supply Management showing that growth in U.S. manufacturing activity accelerated by more than anticipated in December.

The ISM said its purchasing managers index climbed to 54.7 in December from 53.2 in November, with a reading above 50 indicating growth in the manufacturing sector. Economists had expected the index to inch up to 53.8.

The purchasing managers index indicated growth in manufacturing for the fourth consecutive month and a new high reading for the year.

A separate report from the Commerce Department showed that construction spending climbed more than expected in November to reach its highest annual rate in over ten years.

The better than expected U.S. economic data came following the release of an upbeat reading on Chinese manufacturing activity.

While early buying interest was also generated by a jump by the price of crude oil, the price of oil pulled back sharply as the day progressed

After soaring to an eighteen-month high of $55.24 a barrel, crude for February delivery tumbled $1.39 to $52.33 a barrel.

Sector News

While many of the major sectors pulled back off their best levels of the day, gold stocks saw substantial strength. Reflecting the strength in the gold sector, the NYSE Arca Gold Bugs Index surged up by 4.2 percent.

The gains by gold stocks came amid an increase by the price of the precious metal, with gold for February delivery climbing $7.10 to $1,158.80 an ounce.

Significant strength was also visible among telecom stocks, as reflected by the 2.6 percent jump by the NYSE Arca North American Telecom Index. With the gain, the index reached a five-month closing high.

Steel stocks also saw considerable strength on the heels of the upbeat manufacturing data, while biotechnology, energy, and electronic storage stocks also moved notably higher.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher on Tuesday, although the Japanese markets remained closed. Hong Kong's Hang Seng Index advanced by 0.7 percent, while Australia's All Ordinaries Index jumped by 1.2 percent.

Meanwhile, the major European markets ended the day mixed. While the German DAX Index edged down by 0.1 percent, the French CAC 40 Index and the U.K.'s FTSE 100 Index rose by 0.4 percent and 0.5 percent, respectively.

In the bond market, treasuries closed nearly flat after recovering from an early move to the downside. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, inched up by less than a basis point to 2.450 percent.

Looking Ahead

Trading on Wednesday may be impacted by reaction to a report on private sector employment as well as the minutes of the latest Federal Reserve meeting.