Stocks Shrug Off Initial Weakness To Close Firmly Positive - U.S. Commentary

(RTTNews) - Stocks showed a substantial turnaround over the course of the trading day on Wednesday after showing a notable move to the downside at the open. With the rebound, the Dow and the S&P 500 managed to reach new record closing highs.

The major averages saw further upside going into the close, ending the session at their best levels of the day. The Dow rose 70.96 points or 0.5 percent to 15,821.63, the Nasdaq jumped 45.66 points or 1.2 percent at 3,965.58 and the S&P 500 advanced 14.31 points or 0.8 percent to 1,782.00.

The initial weakness on Wall Street partly reflected a negative reaction to the vague communiqué issued by China's Communist Party following the completion of the Third Plenum meeting.

A number of traders had been expecting China to reveal actionable financial reforms and were disappointed by the statement.

Uncertainty about the outlook for the Federal Reserve's stimulus program also weighed on the markets amid another quiet day on the U.S. economic front.

Selling pressure waned not long after the open, however, as traders seemed reluctant to make any significant moves.

The subsequent rebound by the markets has been partly attributed to a rally by shares of Macy's (M), with the department store chain surging up by 9.4 percent to a record closing high.

The strong gain by Macy's came after the company reported better than expected third quarter results and reaffirmed its full-year earnings guidance.

Office supplies retailer Office Depot (ODP) also turned in a strong performance on the day after announcing the appointment of Roland Smith as its Chairman and CEO.

Meanwhile, Perry Ellis (PERY) posted a steep loss after the clothing designer lowered its earnings and revenue guidance for the third quarter and the full-year.

Sector News

Most of the major sectors moved to the upside over the course of the trading day, contributing to the turnaround by the broader markets.

Electronic storage stocks turned in a particularly strong performance, resulting in a 1.9 percent gain by the NYSE Arca Disk Drive Index. Quantum (QTM) and Imation (IMN) posted standout gains, jumping by 6.8 percent and 4.1 percent, respectively.

Significant strength also emerged among software stocks, as reflected by the 1.4 percent gain posted by the Dow Jones Software Index. With the gain, the index reached its best closing level since 2000.

Brokerage stocks also showed a strong upward move, driving the NYSE Arca Broker/Dealer Index up by 1.3 percent to a five-year closing high. Telecom, retail, and housing stocks also saw considerable strength on the day.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region came under pressure on Wednesday. Hong Kong's Hang Seng Index and China's Shanghai Composite Index fell by 1.9 percent and 1.8 percent, respectively, while Japan's Nikkei 225 Index edged down by a more modest 0.2 percent.

The major European markets also moved to the downside on the day. While the U.K.'s FTSE 100 Index tumbled by 1.4 percent, the French CAC 40 Index dropped by 0.6 percent and the German DAX Index dipped by 0.2 percent.

In the bond market, treasuries regained some ground after trending lower for much of the past two weeks. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 4.3 basis points to 2.725 percent.

Looking Ahead

Trading activity may pick up on Thursday amid the release of reports on the U.S. trade balance, weekly jobless claims, and labor productivity.

The Senate Banking Committee's hearing on Janet Yellen's nomination to be the next Federal Reserve Chairman is also likely to be in focus.

On the earnings front, networking giant Cisco (CSCO) is releasing its quarterly results after the close of today's trading, while retail giant Wal-Mart (WMT) is due to report its results before the start of trading on Thursday.