Stocks Close Sharply Higher In Reaction To Upbeat Earnings - U.S. Commentary

(RTTNews) - After turning lower over the course of the previous session, stocks showed a substantial move back to the upside during trading on Thursday. The gains more than offset yesterday's loss, extending the recovery from the recent sell-off.

News of a possible Ebola case in New York City pulled the major averages down off their highs in late-day trading, but they remained firmly positive.

The Dow jumped 216.58 points or 1.3 percent to 16,677.90, the Nasdaq soared 69.95 points or 1.6 percent to 4,452.79 and the S&P 500 surged up 23.71 points or 1.3 percent to 1,950.82.

The rally on Wall Street partly reflected a positive reaction to upbeat earnings news from a number of big-name companies, including Caterpillar (CAT) and 3M (MMM).

Shares of Caterpillar surged up by 5 percent after the construction equipment maker reported third quarter earnings that came in well above analyst estimates.

Caterpillar also raised its full-year earnings outlook despite relatively flat sales, which it called a testament to its diverse portfolio of businesses, disciplined cost control and operational execution.

Diversified manufacturer 3M also turned in a strong performance, jumping by 4.4 after reporting better than expected third quarter earnings.

Upbeat readings on manufacturing activity in both China and Europe also generated some buying interest, with the data offsetting some of the recent concerns about the global economy.

The results of a survey by Markit Economics and HSBC showed that Chinese manufacturing activity grew at a faster rate in October, with the manufacturing index edging up 0.2 points to 50.4.

Separately, Markit said its manufacturing index for the eurozone rose 0.4 points to 50.7 in October, suggesting an unexpected expansion.

On the U.S. economic front, the Labor Department released a report showing that initial jobless claims rebounded in the week ended October 18th after hitting a fourteen-year low in the previous week.

The report said initial jobless claims climbed to 283,000, an increase of 17,000 from the previous week's revised level of 266,000. Economists had expected jobless claims to rise to 285,000.

Meanwhile, the Conference Board released a separate report showing that its index of leading U.S. economic indicators rose by more than economists had anticipated in the month of September.

The report said the leading economic index climbed by 0.8 percent in September, while revised data showed that the index was unchanged in August. The index had been expected to rise by 0.6 percent.

Sector News

Reflecting broad based buying interest on Wall Street, most of the major sectors showed notable moves to the upside on the day.

Networking stocks posted particularly strong gains, driving the NYSE Arca Networking Index up by 4.3 percent. With the gain, the index continued to recover from the one-year closing low set last Monday.

Infinera (INFN) led the sector higher, with the optical networking equipment maker jumping by 30.9 percent after reporting third quarter results that exceeded analyst estimates.

Substantial strength was also visible among railroad stocks, with the Dow Jones Railroads Index surging up by 3.6 percent to a record closing high. Union Pacific (UNP) posted a notable gain after reporting better than expected third quarter results.

Biotechnology also saw significant strength on the day, resulting in a 2.6 percent gain by the NYSE Arca Biotechnology Index. The index also reached a new record closing high.

Computer hardware, natural gas, healthcare and internet also posted standout gains, further offsetting recent weakness.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Thursday. Japan's Nikkei 225 Index fell by 0.4 percent, while Hong Kong's Hang Seng Index dipped by 0.3 percent.

Meanwhile, the major European markets all moved to the upside on the day. While the U.K.'s FTSE 100 Index edged up by 0.3 percent, the German DAX Index and the French CAC 40 Index jumped by 1.2 percent and 1.3 percent, respectively.

In the bond market, treasuries moved notably lower, extending the downward trend seen in recent sessions. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, advanced by 4.6 basis points to 2.275 percent.

Looking Ahead

Trading on Friday is likely to be impacted by reaction to the latest batch of earnings news, with Microsoft (MSFT) and Amazon (AMZN) among the companies releasing their quarterly results after the close of today's trading.

Additionally, Ford (F), Procter & Gamble (PG), Bristol-Myers (BMY), Colgate-Palmolive (CL), and UPS (UPS) are due to report their results before the start of trading on Friday.

Economic data may also attract some attention, as the Commerce Department is scheduled to release its monthly report on new home sales.