Stocks Close Mostly Higher Amid Optimism About Q2 Recovery - U.S. Commentary

(RTTNews) - Stocks moved mostly higher over the course of the trading day on Wednesday, partly offsetting the weakness that was seen in the previous session. The tech-heavy Nasdaq showed a notable upward move, reaching its best closing level since 2000.

The major averages all ended the day in positive territory. The Dow rose 49.38 points or 0.3 percent to 16,867.51, the Nasdaq advanced 29.40 points or 0.7 percent to 4,379.76 and the S&P 500 climbed 9.55 points or 0.5 percent to 1,959.53.

The rebound on Wall Street was largely attributed to optimism about an economic recovery following a sharp contraction in the first quarter.

The Commerce Department released a report before the start of trading showing that GDP tumbled by 2.9 percent in the first quarter compared to the previously estimated 1.0 percent drop. Economists had expected the revised data to show a 1.8 percent decrease.

However, Paul Dales, Senior U.S. Economist at Capital Economics, noted that "more up-to-date data show that activity is rebounding in the second quarter."

"In short, the larger contraction in GDP in the first quarter is not a sign that the U.S. is suffering from a fundamental slowdown - it was still largely due to the extreme weather," Dales said. "The latest data are consistent with growth in the second quarter rebounding to at least 3.0%."

Providing evidence of the second quarter recovery, Markit released a separate report showing a faster rate of growth in the service sector in the month of June.

Markit said its reading on service sector activity climbed to 61.2 in June from 58.4 in May, with a reading above 50 indicating growth.

While a separate report from the Commerce Department showed an unexpected drop in durable goods orders in the month of May, the report also showed a rebound by a key indicator of business spending.

Among individual stocks, shares of Monsanto (MON) turned in a strong performance after the seed company reported better than expected third quarter earnings and raised its full-year guidance. The company also announced a $10 billion share repurchase authorization.

Underwear maker Hanesbrands (HBI) also moved notably higher after announcing an agreement to acquire Paris-based DBApparel for about $545 million.

On the other hand, shares of ImmunoGen (IMGN) fell sharply after Morgan Stanley initiated coverage on the biotech company with an Underweight rating.

Sector News

Internet stocks showed a strong move to the upside on the day, driving the Dow Jones Internet Index up by 1.1 percent. With the gain, the index reached its best closing level in well over two months.

Facebook (FB) and Google (GOOG) turned in two of the internet sector's best performances, advancing by 2.6 percent and 2.5 percent, respectively.

Significant strength was also visible among healthcare provider stocks, as reflected by the 1 percent gain posted by the Dow Jones Health Care Index. The gain lifted the index to a record closing high.

Pharmaceutical, natural gas, and airline stocks also saw notable strength on the day, while most of the other major sectors showed more modest moves to the upside.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Wednesday. Japan's Nikkei 225 Index dropped by 0.7 percent, while Hong Kong's Hang Seng Index edged down by 0.1 percent.

The major European markets also came under pressure on the day. While the French CAC 40 Index tumbled by 1.3 percent, the U.K.'s FTSE 100 Index and the German DAX Index fell by 0.8 percent and 0.7 percent, respectively.

In the bond market, treasuries gave back some ground after seeing initial strength but still closed moderately higher. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 2.7 basis points to 2.559 percent.

Looking Ahead

Trading on Thursday may be impacted by the release of reports on weekly jobless claims and personal income and spending.

The personal income and spending report includes a reading on inflation that is favored by the Federal Reserve and is likely to be in focus in light of recent reports showing notable price growth.