Stocks Rally Amid Positive Reaction To Fed Minutes - U.S. Commentary

(RTTNews) - After moving moderately higher in morning trading on Wednesday, stocks accelerated to the upside following the release of the minutes of the latest Federal Reserve meeting. The markets extended the upward move seen in the previous session, further offsetting the recent pullback.

The major averages saw further upside going into the close, ending the session at their best levels of the day. The Dow jumped 181.04 points or 1.1 percent to 16,437.18, the Nasdaq soared 70.91 points or 1.7 percent to 4,183.90 and the S&P 500 surged up 20.22 points or 1.1 percent to 1,872.18.

The late-day rally came as the minutes of the March Fed meeting eased concerns about the central bank raising interest rates sooner than anticipated.

The minutes said some meeting participants expressed concern that the increase in the median projection for the federal funds rate could be misconstrued as indicating a move to a less accommodative reaction function.

Several participants noted that the increase in the median projection for the federal funds rate overstated the shift in the projections.

Meanwhile, a number of participants said an upward shift was arguably warranted by the improvement in the outlook for the labor market.

Fed Chair Janet Yellen spooked the markets in remarks following the meeting by suggesting that the Fed is likely to begin raising interest rates by the middle of next year.

Peter Boockvar, managing director at the Lindsey Group, said, "Some just don't want to give up easy money while others are saying in essence that after all these years, it is time."

"It's also a battle of semantics that market participants should watch but not pay much attention to right now because it's not a factor until 2015 and we still have $660 billion of QE at an annualized run rate to unwind," he added.

Earlier in the day, buying interest was generated in reaction to quarterly results from Alcoa (AA), with the aluminum giant advancing by 3.8 percent on the day.

While Alcoa swung to a net loss for the first quarter compared to a year-ago profit, the company reported better than expected adjusted earnings, which exclude restructuring charges. Alcoa also reiterated its forecast for 7 percent global aluminum demand growth in 2014.

Alcoa was removed from the Dow last September, but the release of quarterly results from the company is still seen as the unofficial start of earnings season.

Sector News

Biotechnology stocks showed a substantial move to the upside on the day, driving the NYSE Arca Biotechnology Index up by 3.8 percent. The gain by the index came after it ended the previous session at a two-month closing low.

Nektar Therapeutics (NKTR), Vertex (VRTX), and Regeneron (REGN) turned in some of the biotech sector's best performances.

Significant strength also emerged among airline stocks, as reflected by the 2.6 percent gain posted by the NYSE Arca Airline Index. The index regained some ground after closing lower for four straight sessions but remains well off last Wednesday's nearly twelve-year closing high.

Healthcare and pharmaceutical stocks also saw considerable strength on the day, with the Dow Jones Health Care Index and the NYSE Arca Pharmaceutical Index advancing by 2.2 percent and 1.9 percent, respectively.

Most of the other major sectors also moved to the upside on the day, with notable strength visible among software, defense, and chemical stocks.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher on Wednesday, although Japan's Nikkei 225 Index bucked the uptrend and tumbled by 2.1 percent. Hong Kong's Hang Seng Index jumped by 1.1 percent, while Australia's All Ordinaries Index advanced by 0.9 percent.

The major European markets also moved to the upside on the day. While the German DAX Index edged up by 0.2 percent, the French CAC 40 Index rose by 0.4 percent and the U.K.'s FTSE 100 Index climbed by 0.7 percent.

In the bond market, treasuries bounced off their lows following the release of the Fed minutes before closing roughly flat. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, inched up by less than a basis point to 2.684 percent after reaching a high of 2.723 percent.

Looking Ahead

Following several quiet days on the U.S. economic front, trading on Thursday may be impacted by the release of reports on weekly jobless claims and import and export prices.

On the earnings front, retailers Family Dollar (FDO), Rite Aid (RAD), and Pier 1 Imports (PIR) are among the companies due to report their quarterly results before the start of trading on Thursday.