Stocks Close Mostly Higher On Alcoa Earnings, Fed Minutes - U.S. Commentary

(RTTNews) - Stocks moved mostly higher over the course of the trading day on Wednesday, partly offsetting the notable pullback seen over the two previous sessions. The markets benefited from a positive reaction to earnings news from Alcoa (AA) and the minutes of the latest Federal Reserve meeting.

The major averages moved roughly sideways going into the close, hovering firmly in positive territory. The Dow climbed 78.99 points or 0.5 percent to 16,985.61, the Nasdaq advanced 27.57 points or 0.6 percent to 4,419.03 and the S&P 500 rose 9.12 points or 0.5 percent to 1,972.83.

Early buying interest was seen following the release of better than expected quarterly results from Alcoa, with the aluminum giant jumping by 5.7 percent on the day.

After the close of trading on Tuesday, Alcoa reported second quarter net income compared to a year-ago loss. The company also reported adjusted earnings and revenues that exceeded estimates and reaffirmed its forecast for global aluminum demand growth.

While Alcoa was dropped from the list of Dow components last year, the release of quarterly results from the company is still seen as the unofficial start of earnings season.

The reporting season will really start to pick up next week, with Citigroup (C), Goldman Sachs (GS), JP Morgan (JPM), Intel (INTC), Bank of America (BAC), IBM (IBM), Morgan Stanley (MS), and General Electric (GE) among the slew of big-name companies due to report their quarterly results.

Stocks saw some further upside on the heels of the release of the minutes of the Federal Reserve's monetary policy meeting in June.

The minutes confirmed that the Fed plans to completely unwind its asset purchase plan by October as long the economy continues to pick up.

The Fed indicated that it intends to reduce the pace of its asset purchases by $10 billion at each of the next two meetings followed by a final $15 billion reduction in October.

However, the minutes offered few signals about when the Fed might potentially begin raising interest rates from the current near-zero levels.

Paul Ashworth, Chief U.S. Economist at Capital Economics, noted that Fed officials spent a lot of time debating how to normalize monetary policy once the time came.

"As part of the revisions to its exit strategy, it now looks as if the Fed will continue to invest the proceeds of its maturing asset holdings until sometime after the first rate hike," Ashworth said.

H added, "Outright asset sales were not even discussed in the minutes, which adds to the impression that if sales even took place, it could be 2016 or 2017 before they begin."

Sector News

Gold stocks showed a substantial move to the upside over the course of the trading day, driving the NYSE Arca Gold Bugs Index up by 2.8 percent. With the gain, the index reached its best closing level in well over three months.

The strength among gold stocks came amid an increase by the price of the precious metal, with gold for August delivery climbing $7.80 to $1,324.30 an ounce.

Significant strength also emerged among biotechnology stocks, as reflected by the 1.4 percent gain posted by the NYSE Arca Biotechnology Index. Exact Sciences (EXAS), InterMune (ITMN), and Alexion (ALXN) turned in some of the sector's best performances.

Telecom stocks also saw notable strength on the day, with America Movil (AMX) leading the way higher amid news that the Mexican telecom giant is prepared to divest assets to avoid the impact of new regulations.

Similarly, American Airlines (AAL) helped lead the airline sector higher after raising its forecast for second quarter growth in passenger revenue per available seat mile.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Wednesday. Japan's Nikkei 225 Index edged down by 0.1 percent, while Hong Kong's Hang Seng Index tumbled by 1.6 percent.

Meanwhile, the major European markets turned in a mixed performance on the day. While the U.K.'s FTSE 100 Index dropped by 0.3 percent, the French CAC 40 Index and the German DAX Index both rose by 0.4 percent.

In the bond market, treasuries showed a notable rebound following the release of the Fed minutes, closing modestly higher. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, dipped 1.8 basis points to 2.547 percent.

Looking Ahead

After several quiet days on the U.S. economic front, trading on Thursday could be impacted by the release of reports on weekly jobless claims and wholesale inventories.

Traders are also likely to keep an eye on remarks by Kansas City Fed President Esther George on the economy and monetary policy.