Fed's Beige Book Contributes To Strength On Wall Street - U.S. Commentary

(RTTNews) - After initially showing a lack of direction, stocks moved mostly higher over the course of the trading day on Wednesday. The gains on the day extended yesterday's upward move and lifted the Dow and the S&P 500 to new record closing highs.

The major averages pulled back off their best levels going into the close but still ended the day in positive territory. The Dow edged up 33.07 points or 0.2 percent to 17,912.62, the Nasdaq climbed 18.66 points or 0.4 percent to 4,774.47 and the S&P 500 rose 7.78 points or 0.4 percent to 2,074.33.

The strength that emerged on Wall Street partly reflected a positive reaction to the Federal Reserve's Beige Book, a compilation of anecdotal evidence on economic conditions in the twelve Fed districts.

The Beige Book said U.S. economic activity continued to expand in October and November, and a number of districts noted that contacts remained optimistic about the outlook.

On the inflation front, the report said overall price and wage inflation remained subdued, as price increases for raw materials were generally muted.

The information in the Beige Book will be used by the Fed to determine any changes to monetary policy at the Federal Open Market Committee meeting later this month.

The choppy trading experienced earlier in the session came on the heels of the release of a mixed batch of economic data.

Before the start of trading, payroll processor ADP released a report showing that private sector job growth fell short of economist estimates in November.

ADP said private sector employment rose by 208,000 jobs in November, while economists had been expecting an increase of about 225,000 jobs.

Meanwhile, the Institute for Supply Management released a separate report showing much faster than expected growth in U.S. service sector activity.

The ISM said its non-manufacturing index jumped to 59.3 in November from 57.1 in October, with a reading above 50 indicating growth in the service sector. Economists had expected the index to inch up to 57.5.

Sector News

While most of the major sectors moved to the upside on the day, gold stocks posted particularly strong gains. Reflecting the strength in the gold sector, the NYSE Arca Gold Bugs Index surged up by 2.8 percent.

The rally by gold stocks came amid an increase by the price of the precious metal, with gold for February delivery climbing $9.30 to $1,208.70 an ounce.

Significant strength was also visible among steel stocks, as reflected by the 2.3 percent gain posted by the NYSE Arca Steel Index. The index regained some ground after ending the previous session at its lowest closing level in well over a year.

Oil service stocks also rebounded following recent weakness, with the Philadelphia Oil Service Index jumping by 2.1 percent. The gain by the index came after it ended Tuesday's trading at a two-year low.

Semiconductor, railroad, networking, and brokerage stocks also saw considerable strength amid broad based buying interest.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Wednesday. Japans Nikkei 225 Index rose by 0.3 percent, while Hong Kong's Hang Seng Index slumped by 1 percent.

The major European markets also ended the day mixed. While the U.K.'s FTSE 100 Index fell by 0.4 percent, the German DAX Index climbed by 0.4 percent and the French CAC 40 Index inched up by 0.1 percent.

In the bond market, treasuries closed roughly flat after seeing modest weakness for much of the session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, ticked up by less than a basis point to 2.287 percent.

Looking Ahead

Thursday's trading may be impacted by reaction to the European Central Bank's monetary policy announcement and the weekly jobless claims report, although activity is likely to be somewhat subdued ahead of the release of the monthly jobs data on Friday.

On the earnings front, Sears (SHLD), Barnes & Noble (BKS), and Dollar General (DG) are among the companies due to report their quarterly results before the start of trading on Thursday.