Optimism About Fed Stimulus Helps Stocks Extend Upward Trend - U.S. Commentary

(RTTNews) - Stocks moved mostly higher over the course of the trading day on Friday, extending the upward trend seen over the past few sessions. Buying interest was somewhat subdued, but the Dow and the S&P 500 still managed to reach new record highs.

The major averages saw further upside going into the close, ending the session at their best levels of the day. The Dow climbed 85.48 points or 0.5 percent to 15,961.70, the Nasdaq edged up 13.23 points or 0.3 percent to 3,985.97 and the S&P 500 rose 7.56 points or 0.4 percent to 1,798.18.

For the week, the major averages all posted notable gains. The Dow advanced by 1.3 percent, while the Nasdaq and the S&P 500 jumped by 1.7 percent and 1.6 percent, respectively.

The strength on Wall Street came as traders continued to react positively to Janet Yellen's dovish comments at her confirmation hearing before the Senate Banking Committee on Thursday.

Yellen, the nominee to succeed Federal Reserve Chairman Ben Bernanke, defended the central bank's ultra-easy monetary policy and argued that unemployment remains too high for the Fed to consider significantly scaling back its asset purchase program.

"I believe that supporting the recovery today is the surest path to returning to a more normal approach to monetary policy," Yellen said.

A batch of largely weaker than expected economic data may have added to optimism that the Fed will leave its stimulus program intact for the foreseeable future.

Shortly before the start of trading, the Fed released a report showing an unexpected drop in industrial production in the month of October.

The report said industrial production edged down by 0.1 percent in October after climbing by 0.7 percent in September. Economists had expected production to inch up by 0.1 percent.

Commenting on the report, Rob Carnell, chief international economist at ING, said the headline appears worse than the underlying picture.

"Most of the softness was concentrated in utilities and mining, in particular natural gas extraction, where on-going price softness seems to have weighed on extraction activity and production has been feeble for some months," Carnell said.

A separate report from the New York Fed showed an unexpected contraction in regional manufacturing activity in November, while the Labor Department released a report showing a bigger than expected drop in import prices in October.

Sector News

Biotechnology stocks showed a substantial move to the upside over the course of the trading day, driving the NYSE Arca Biotechnology Index up by 2 percent. With the gain, the index reached its best closing level in well over a month.

BioMarin (BMRN) helped to lead the biotech sector higher, with the biopharmaceutical company jumping 7.7 percent after French regulators granted temporary authorization for sales of Vimizim for the treatment of Morquio A Syndrome.

Considerable strength also emerged among telecom stocks, as reflected by the 1.4 percent gain posted by the NYSE Arca Telecom Index. A strong gain by Sprint (S) helped lift the index to a five-year closing high.

Trucking, networking, and steel stocks also saw significant strength, moving higher along with most of the other major sectors.

On the other hand, gold stocks came under pressure on the day even though the price of the precious metal closed modestly higher. Reflecting the weakness in the sector, the NYSE Arca Gold Bugs Index fell by 1.6 percent.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region saw considerable strength during trading on Friday. Japan's Nikkei 225 Index surged up by 2 percent, while Hong Kong's Hang Seng Index jumped by 1.7 percent.

The major European markets also moved to the upside on the day. While the U.K.'s FTSE 100 Index rose by 0.4 percent, the French CAC 40 Index and the German DAX Index both edged up by 0.2 percent.

In the bond market, treasuries closed slightly lower after moving notably higher over the two previous sessions. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, inched up by less than a basis point to 2.709 percent.

Looking Ahead

Next week's trading could be impacted by the release of some more closely watched economic data, including reports on retail sales, existing home sales, and producer and consumer prices.

The minutes of the latest Federal Reserve meeting are also likely to attract some attention along with a speech by Fed Chairman Bernanke.

On the earnings front, Best Buy (BBY), J.C. Penney (JCP), Home Depot (HD), Lowe's (LOW), and Tyson Foods (TSN) are among the companies due to report their quarterly results next week.