Stocks Close Higher Amid Optimism About Chinese Stimulus - U.S. Commentary

(RTTNews) - Stocks moved mostly higher over the course of the trading day on Tuesday, adding to the gains posted in the previous session. With the upward move on the day, the major averages further offset the sharp pullback seen late last week.

The major averages ended the day firmly in positive territory but off their highs for the session. The Dow jumped 165.65 points or 1 percent to 17,417.27, the Nasdaq climbed 32.19 points or 0.7 percent to 5,001.11 and the S&P 500 advanced 17.82 points or 0.9 percent to 2,038.97.

The strength on Wall Street partly reflected optimism about the possibility of further Chinese stimulus following statements from government officials.

At the end of the Chinese government's Central Economic Work Conference, officials said monetary policy must be more "flexible" and fiscal policy more "forceful" to halt the country's economic slowdown.

The comments contributed to a rebound by China's Shanghai Composite Index as well as strength in other emerging markets.

An increase by the price of crude oil also generated some buying interest, with crude for February delivery rising $0.33 to $36.14 a barrel in its first day as the front-month contract.

On the U.S. economic front, the Commerce Department released a report before the start of trading showing a slight downward revision to third quarter economic growth.

The report said real gross domestic product increased by 2.0 percent in the third quarter compared to the previously estimated 2.1 percent growth. The downward revision matched economist estimates.

The Commerce Department said the slightly slower than previously estimated GDP growth primarily reflected a downward revision to private inventory investment.

Gus Faucher, senior economist at PNC Financial, said the downward revision to inventory investment provides modest upside potential for growth in late 2015 and early 2016, adding, "The economy should continue to expand at an above-trend pace through next year."

Meanwhile, the National Association of Realtors released a separate report showing that existing home sales tumbled to their lowest level in well over a year in November.

Sector News

Steel stocks saw substantial strength on the day, benefiting from optimism further Chinese stimulus will boost demand. The NYSE Steel Index surged up by 3.5 percent, climbing further off the record closing low set last Thursday.

Allegheny Technologies (ATI) helped lead the steel sector higher, jumping by 12 percent, while U.S. Steel (X) and ArcelorMittal (MT) also posted strong gains.

Significant strength was also visible among oil service stocks, which moved higher along with the price of crude oil. The Philadelphia Oil Service Index shot up by 2.9 percent, bouncing well off last Friday's six-year closing low.

Railroad stocks also saw considerable strength on the day, driving the Dow Jones Railroads Index up by 2.3 percent. The index rebounded from yesterday's two-year closing low.

Tobacco, trucking, and chemical stocks also showed strong moves to the upside, moving higher along with most of the other major sectors.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Tuesday. Hong Kong's Hang Seng Index and Australia's All Ordinaries Index both edged up by 0.2 percent. However, Japan's Nikkei 225 Index bucked the uptrend and dipped 0.2 percent.

Meanwhile, the major European markets turned in a mixed performance on the day. While the German DAX Index edged down by 0.1 percent, the U.K.'s FTSE 100 Index advanced by 0.8 percent and the French CAC 40 Index inched up by 0.1 percent.

In the bond market, treasuries moved to the downside after ending the previous session roughly flat. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 4.2 basis points to 2.239 percent.

Looking Ahead

Trading on Wednesday may be impacted by the release of a slew of U.S. economic data, including reports on durable goods orders, personal income and spending, new home sales, and consumer sentiment.