Stocks Extend Recovery Ahead Of Apple Earnings - U.S. Commentary

(RTTNews) - Stocks moved notably higher over the course of the trading day on Monday, extending the strong upward move seen last Friday. The gains on the day continued the recent recovery by the markets, with the Nasdaq and the S&P 500 closing higher for the third consecutive session.

The major averages all closed in positive territory, although a steep loss by IBM (IBM) limited the upside for the Dow. While the Dow inched up 19.26 points or 0.1 percent to 16,399.67, the Nasdaq soared 57.64 points or 1.4 percent to 4,316.07 and the S&P 500 jumped 17.25 points or 0.9 percent to 1,904.01.

The strength on Wall Street was partly due to bargain hunting, as traders continued to pick up stocks at reduced levels following the sell-off seen over the past few weeks.

A number of analysts have suggested that the sharp pullback by the markets dragged stocks to oversold levels in light of largely upbeat U.S. economic data.

Traders also reacted positively to easing concerns about an Ebola outbreak in the U.S. amid news that forty-three people who came into contact with a patient that died of the disease have been officially cleared and released from quarantine.

The tech-heavy Nasdaq also benefited from a notable advance by shares of Apple (AAPL), with the iPhone and iPad maker climbing by 2.1 percent ahead of the release of its fourth quarter results after the close of trading.

As mentioned above, however, a steep drop by shares of IBM helped to limit the upside for the Dow. The tech giant ended the day down by 7.1 percent, at its worst closing level in three years.

The sharp pullback by IBM came after the company reported third quarter earnings that fell year-over-year and came in well below analyst estimates.

IBM chairman, president and CEO Ginni Rometty expressed disappointment in the company's performance, citing a marked slowdown in client buying behavior in September.

Overall, trading activity remained somewhat subdued, with a lack of major U.S. economic data keeping some traders on the sidelines.

The economic calendar remains relatively light throughout the week following the slew of data released last week, although traders are likely to keep an eye on reports on home sales, consumer prices, and weekly jobless claims.

Sector News

While most of the major sectors moved to the upside, airline stock posted particularly strong gains on the day. The NYSE Arca Airline Index surged up by 3.5 percent, climbing further off the nearly eight-month closing low it set last Monday.

Hawaiian Airlines parent Hawaiian Holdings (HA), United Continental (UAL) and Southwest (LUV) turned in some of the sector's best performances.

Gold stocks also saw considerable strength, moving higher along with the price of the precious metal. With gold for December delivery climbing $5.70 to $1,244.70 an ounce, the NYSE Arca Gold Bugs Index jumped by 2.2 percent.

Significant strength was also visible among housing stocks, as reflected by the 2.2 percent gain posted by the Philadelphia Housing Sector Index. Lennox (LII) led the sector higher after reporting better than expected third quarter earnings.

Retail, semiconductor, oil service, and utilities stocks also saw notable strength on the day, reflecting broad based buying interest.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved to the upside during trading on Monday. Japan's Nikkei 225 Index surged up by 4 percent, while China's Shanghai Composite Index advanced by 0.7 percent.

Meanwhile, the major European markets all came under pressure on the day. While the U.K.'s FTSE 100 Index fell by 0.7 percent, the French CAC 40 Index dropped by 1 percent and the German DAX Index tumbled by 1.5 percent.

In the bond market, treasuries saw modest strength after pulling back sharply over the course of the two previous sessions. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 1.8 basis points to 2.181 percent.

Looking Ahead

Trading on Tuesday is likely to be impacted by reaction to Apple's quarterly results, which could help set the tone for the remainder of earnings season.

Additionally, Dow components Coca-Cola (KO), McDonald's (MCD), Travelers (TRV), United Technologies (UTX), and Verizon (VZ) are all due to report their quarterly results before the start of trading on Tuesday.

Following today's lack of economic data, trading on Tuesday could also be impacted by the National Association of Realtors' report on existing home sales.