Stocks Holding On To Strong Gains In Mid-Day Trading - U.S. Commentary

(RTTNews) - After moving sharply higher early in the session, stocks continue to turn in a strong performance in mid-day trading on Monday. While buying interest has waned somewhat, the markets have maintained a positive bias.

The major averages have moved roughly sideways in recent trading, hovering firmly in positive territory. The Dow is up 145.17 points or 0.9 percent at 15,900.53, the Nasdaq is up 29.75 points or 0.7 percent at 4,030.73 and the S&P 500 is up 12.60 points or 0.7 percent at 1,787.92.

The strength on Wall Street is partly due to bargain hunting following the weakness seen last week, which dragged the Dow and the S&P 500 to their lowest levels in a month.

Buying interest was also generated by the release of some strong economic data from overseas, including an upbeat report on European private sector activity.

The report from Markit Economic showed that its composite output index for Europe rose 0.4 points to 52.1 in December. The manufacturing index rose 1.1 points to 52.7, while the service sector index edged down 0.2 points to 51.

Traders are also digesting the latest batch of U.S. economic data, with a report from the Federal Reserve showing that industrial production rose by much more than expected in the month of November.

The report said industrial production surged up by 1.1 percent in November compared to economist estimates for an increase of about 0.6 percent.

A separate report from the New York Fed showed that its index of regional manufacturing activity returned to positive territory in December, while the Labor Department reported an upward revision to third quarter productivity growth.

While the largely positive data has led some traders to predict that the Fed will began scaling back its asset purchases at its monetary policy meeting this week, traders seem to have shrugged off recent concerns about the outlook for the stimulus program.

Joel Naroff, President and Chief Economist at Naroff Economic Advisors, said, "The data have turned fairly consistently stronger and the Fed is likely to start the process of getting out of the quantitative easing business by the end of the winter."

"Whether the start date is this Wednesday (I don't think so but it is possible) or next year at either the January or March meeting is unclear, but it is coming," he added.

The Fed is scheduled to begin its two-day monetary policy meeting on Tuesday and announce its decision Wednesday afternoon.

Sector News

Semiconductor stocks continue to see significant strength in mid-day trading, with the Philadelphia Semiconductor Index up by 1.7 percent. The index is regaining some ground after closing lower for four consecutive sessions.

LSI Corp. (LSI) is leading the semiconductor sector higher after agreeing to be acquired by Avago Technologies (AVGO) for $6.6 billion in cash. Shares of LSI have jumped by 38.7 percent.

Considerable strength has also emerged among gold stocks, as reflected by the 1.5 percent gain being posted by the NYSE Arca Gold Bugs Index. The strength among gold stocks comes as gold for February delivery is climbing $13.60 to $1,248.20 an ounce.

Electronic storage stocks are also turning in a strong performance on the day, with the NYSE Arca Disk Drive Index up by 1.4 percent after ending last Friday's trading at its worst closing level in a month.

Housing, networking, and oil stocks are also posting notable gains, moving to the upside along with most of the other major sectors.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Monday. Japan's Nikkei 225 Index tumbled by 1.6 percent, while Hong Kong's Hang Seng Index ended the day down by 0.6 percent.

Meanwhile, the major European markets showed strong moves to the upside on the day. The U.K.'s FTSE 100 Index jumped by 1.3 percent, while the French CAC 40 Index and the German DAX Index surged up by 1.5 percent and 1.7 percent, respectively.

In the bond market, treasuries have pulled back off their best levels but continue to see modest strength. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 1.2 basis points at 2.856 percent.