Chinese Stimulus News Contributes To Rally On Wall Street - U.S. Commentary

(RTTNews) - Following the sell-off seen in the previous session, stocks showed a strong move back to the upside during trading on Monday. With the gains, the major averages nearly offset last Friday's losses, although they remain below their recent highs.

The major averages moved roughly sideways going into the close, hovering firmly in positive territory. The Dow jumped 208.63 points or 1.2 percent to 18,034.93, the Nasdaq surged up 62.79 points or 1.3 percent to 4,994.60 and the S&P 500 climbed 19.22 points or 0.9 percent to 2,100.40.

The strength on Wall Street came amid news of additional Chinese stimulus after reports about new trading regulations in China contributed to the sharp pullback in the previous session.

On Sunday, the People's Bank of China lowered the reserve requirement ratio for banks by 100 basis points to 18.5 percent.

The reduction marked the second cut this year and came after the Chinese economy logged its weakest growth in six years.

Lou Brien, an economic strategist at DRW Trading, said, "The cut in the RRR was larger than many were expecting and it was the biggest since 2008. It is estimated that it will free up the equivalent of $212 billion to be loaned out."

Buying interest was also generated in reaction to the latest batch of earnings news, with financial giant Morgan Stanley (MS) closing modestly higher after reporting its first quarter results.

Morgan Stanley reported earnings and revenues that exceeded analyst estimates, benefiting from a strong performance in investment management and fixed income.

Toy maker Hasbro (HAL) and oil services provider Halliburton (HAL) also moved notably higher after reporting quarterly results that beat expectations.

Amid a quiet week on the U.S. economic front, earnings news is likely to move into the spotlight, with a slew of big-name companies due to release their quarterly results.

Coca-Cola (KO), McDonald's (MCD), AT&T (T), Facebook (FB), General Motors (GM), Google (GOOG), and Microsoft (MSFT) are among the companies due to report their results this week.

Sector News

Railroad stocks saw substantial strength on the day, driving the Dow Jones Railroads Index up by 2.6 percent. With the gain, the index climbed further off the six-month closing low it set last Wednesday.

CSX Corp. (CSX) helped to lead the railroad sector higher, jumping by 4.8 percent to its best closing level in a month.

Significant strength was also visible among trucking stocks, as reflected by the 1.9 percent gain posted by the Dow Jones Trucking Index. Within the trucking sector, YRC Worldwide (YRCW) surged up by 4.1 percent.

Software stocks also saw considerable strength on the day, resulting in a 1.8 percent jump by the Dow Jones Software Index. Check Point Software (CHKP) posted a standout gain after reporting better than expected quarterly results.

Airline, telecom, utilities, and computer hardware stocks also moved notably higher, reflecting broad based buying interest on Wall Street.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Monday. Japan's Nikkei 225 Index edged down by 0.1 percent, while Hong Kong's Hang Seng Index tumbled by 2 percent.

Meanwhile, the major European markets moved notably higher on the day. While the German DAX Index surged up by 1.7 percent, the French CAC 40 Index and the U.K.'s FTSE 100 Index advanced by 0.9 percent and 0.8 percent, respectively.

In the bond market, treasuries gave back some ground after trending higher over the past few sessions. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 4.5 basis points to 1.895 percent.

Looking Ahead

Amid another quiet day on the U.S. economic front, trading on Tuesday may be impacted by reaction to the latest earnings news.

IBM (IBM) is releasing its quarterly results after the close of today's trading, while DuPont (DD), Travelers (TRV) and Verizon (VZ) are due to report their results before the start of trading on Tuesday.