Stocks Close Higher After Recovering From Initial Weakness - U.S. Commentary

(RTTNews) - After coming under pressure at the start of trading, stocks showed a significant rebound over the course of the trading session on Monday. The volatility on the day came amid the release of a mixed batch of U.S. economic data.

The major averages finished the session firmly in positive territory. The Dow rose 67.78 points or 0.4 percent to 17,545.18, the Nasdaq jumped 43.46 points or 0.9 percent to 5,091.70 and the S&P 500 climbed 10.90 points or 0.5 percent to 2,102.44.

The initial weakness on Wall Street was partly due to the release of a disappointing report from the New York Federal Reserve on regional manufacturing activity.

The New York Fed said its general business conditions index tumbled to a negative 14.9 in August from a positive 3.9 in July, with a negative reading indicating a contraction in manufacturing activity.

The sharp drop came as a surprise to economists, who had expected the index to climb to a positive reading of 4.8.

With the unexpected decrease, the general business conditions index fell to its lowest level since hitting a negative 19.4 in April of 2009.

Selling pressure waned not long after the open, however, and stocks rebounded amid the release of a separate report from the National Association of Home Builders showing a modest uptick in homebuilder confidence.

The report said the NAHB/Wells Fargo Housing Market Index inched up to 61 in August from 60 in July, in line with economist estimates.

With the modest uptick, the housing market index reached its highest level since hitting a matching reading in November of 2005.

The big swings by the markets were partly due to light trading, with many traders away from their desks to take advantage of the waning summer.

Traders are also looking ahead to the release of the minutes of the Federal Reserve's latest monetary policy meeting on Wednesday.

The minutes are likely to be closely analyzed for hints regarding whether the Fed will begin raising interest rates at its next meeting in September.

Sector News

Gold stocks showed a substantial move to the upside on the day, driving the NYSE Arca Gold Bugs Index up by 4.1 percent. The gain by the index came after it closed lower in the two previous sessions.

The rally by gold stocks came amid an increase by the price of the precious metal, with gold for December delivery climbing $5.70 to $1,118.40 an ounce.

Considerable strength also emerged among biotechnology stocks, as reflected by the 2.5 percent gain posted by the NYSE Arca Biotechnology Index. The gain by the index came after it ended last Friday's trading at a three-month closing low.

Telecom stocks also turned in a strong performance, resulting in a 1.6 percent gain by the NYSE Arca North American Telecom Index. Sprint (S) led the sector higher, jumping by 10.1 percent.

Airline, housing, and healthcare stocks also saw notable strength on the day, moving higher along with most of the other major sectors.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Monday. Japan's Nikkei 225 Index rose by 0.5 percent, while Hong Kong's Hang Seng Index fell by 0.7 percent.

The major European markets also finished the day mixed. While the French CAC 40 Index advanced by 0.6 percent, the U.K.'s FTSE 100 Index closed just below the unchanged line and the German DAX Index fell by 0.4 percent.

In the bond market, treasuries moved notably higher following the disappointing manufacturing data. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 4.6 basis points to 2.15 percent.

Looking Ahead

Economic data may continue to attract attention on Tuesday, as the Commerce Department is scheduled to release a report on new residential construction in the month of July.

Trading could also be impacted by reaction to earnings news from retail giants Wal-Mart (WMT) and Home Depot (HD), which are both releasing their quarterly results before the start of trading on Tuesday.