Interest Rate Optimism Contributes To Strength On Wall Street

(RTTNews) - Following the strong upward move seen during last Friday's session, stocks saw further upside during trading on Monday. The major averages all moved higher on the day, with the Dow and the S&P 500 reaching new record closing highs.

The major averages reached new highs for the session late in the day before giving back some ground going into the close. The Dow rose 201.36 points or 0.5 percent to 43,065.22, the Nasdaq jumped 159.75 points or 0.9 percent to 18,502.69 and the S&P 500 climbed 44.82 points or 0.8 percent to 5,859.85.

The continued strength on Wall Street came amid optimism about the outlook for interest rates following last Friday's report on producer price inflation.

The Labor Department report showed producer prices were unexpectedly unchanged in September, while the annual rate price growth slowed modestly.

While hopes the Federal Reserve will lower rates by another 50 basis points next month have largely evaporated, the data reinforced optimism the central bank will cut rates by 25 basis points.

CME Group's FedWatch Tool is currently indicating an 86.1 percent chance the Fed will cut rates by a quarter point at its November meeting.

Overall trading activity was somewhat subdued, however, with some traders likely away from their desks due to the Columbus Day holiday.

A lack of major U.S. economic data may also have kept some traders on the sidelines ahead of the release of key reports on retail sales and industrial production later in the week.

Sector News

Semiconductor stocks turned in some of the market's best performances on the day, with the Philadelphia Semiconductor Index jumping by 1.8 percent.

Considerable strength was also visible among housing stocks, as reflected by the 1.6 percent gain posted by the Philadelphia Housing Sector Index.

Airline, utilities and banking stocks also saw significant strength, while networking stocks showed a notable move to the downside.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance on Monday, with Japanese markets closed for a holiday. China's Shanghai Composite Index surged by 2.1 percent, while Hong Kong's Hang Seng Index slid by 0.8 percent.

Meanwhile, the major European markets all moved to the upside on the day. While the German DAX Index advanced by 0.7 percent, the U.K.'s FTSE 100 Index climbed by 0.5 percent and the French CAC 40 Index rose by 0.3 percent.

The bond markets were closed in observance of Columbus Day.

Looking Ahead

Trading on Tuesday may be impacted by reaction to earnings news from Bank of America (BAC), Citigroup (C) Goldman Sachs (GS), Johnson & Johnson (JNJ), UnitedHealth (UNH) and Walgreens (WBA).