Stocks Close Modestly Higher In Reaction To Bernanke Remarks - U.S. Commentary

(RTTNews) - While buying interest was somewhat subdued, stocks moved modestly higher over the course of the trading day on Wednesday. The markets benefited from a positive reaction to remarks by Federal Reserve Chairman Ben Bernanke.

The major averages moved to the upside going into the close, ending the day modestly higher. The Dow inched up 18.67 points or 0.1 percent to 15,470.52, the Nasdaq rose 11.50 points or 0.3 percent to 3,610.00 and the S&P 500 climbed 4.65 points or 0.3 percent to 1,680.91.

The strength on Wall Street came as Bernanke delivered his closely watched testimony before the House Financial Services Committee.

Bernanke reiterated that the central bank believes it would be appropriate to begin scaling back its asset purchase program later this year if incoming data is broadly consistent with projections.

The Fed chief added that the asset purchase program could be wrapped up by mid-2014, although he stressed that asset purchases depend on economic and financial developments and are by no means on a preset course.

Bernanke also said highly accommodative monetary policy will remain appropriate for the foreseeable future, reiterating remarks that triggered a rally last week.

Chris Low, chief economist at FTN Financial, said, "Bernanke's remarks today are similar to previous ones, but the tone is decidedly more dovish, suggesting he would like to walk back at least some of the recent rise in interest rates."

The remarks from Bernanke largely overshadowed the release of a report from the Commerce Department showing an unexpected drop in housing starts in the month of June.

The Commerce Department said housing starts tumbled 9.9 percent to an annual rate of 836,000 in June from the revised May estimate of 928,000.

The steep drop came as a surprise to economists, who had expected housing starts to climb to an annual rate of 951,000 from the 914,000 originally reported for the previous month.

The report also showed an unexpected decrease in building permits, which are seen as an indicator of future housing demand.

On the earnings front, shares of Bank of America (BAC) moved higher on the day after the financial giant reported stronger than expected second quarter earnings growth.

Online media giant Yahoo (YHOO) also moved to the upside after reporting better than expected second quarter earnings. However, the company's revenues came in below estimates.

Meanwhile, shares of Mattel (MAT) came under pressure after the toy maker reported lower second quarter earnings amid a continued drop in Barbie sales.

Sector News

Airline stocks turned in some of the markets' best performances on the day, resulting in a 2.4 percent gain by the NYSE Arca Airline Index. With the gain, the index reached a six-year closing high.

United Continental (UAL) helped to lead the airline sector higher, with shares of the giant airline surging up by 8.1 percent.

Significant strength was also visible among steel stocks, as reflected by the 1.5 percent gain posted by the NYSE Arca Steel Index. The gain lifted the index to its best closing level in well over a month.

Tobacco, chemical, and networking stocks also posted strong gains, with the gains by tobacco stocks lifting the NYSE Arca Tobacco Index to a record closing high.

Meanwhile, gold stocks gave back some ground after ending the previous session sharply higher. The NYSE Arca Gold Bugs Index fell by 2.8 percent, partly offsetting the 5.6 percent gain posted on Tuesday.

A decrease by the price of gold contributed to the pullback the sector, with gold for August delivery sliding $12.90 to $1,277.50 an ounce.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in another mixed performance during trading on Wednesday. Japan's Nikkei 225 Index inched up by 0.1 percent, while China's Shanghai Composite Index fell by 1 percent.

Meanwhile, the major European markets all moved to the upside on the day. While the U.K.'s FTSE 100 Index edged up by 0.2 percent, the French CAC 40 Index and the German DAX Index rose by 0.6 percent and 0.7 percent, respectively.

In the bond market, treasuries extended their recent upward trend in reaction to the remarks from Bernanke. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 4.1 basis points to 2.491 percent.

Looking Ahead

Bernanke is due to make another appearance on Capitol Hill on Thursday, with the Fed chief scheduled to testify before the Senate Banking Committee.

While Bernanke's prepared remarks are likely to be same as his House testimony, traders are likely to keep an eye on the question-and-answer portion of his appearance.

Trading could also be impacted by reaction to quarterly results from Intel (INTC), American Express (AXP), and IBM (IBM), which are among the companies releasing their quarterly results after the close of today's trading.

Reports on weekly jobless claims, leading economic indicators and Philadelphia-area manufacturing activity may also attract some attention.