Stocks Close Sharply Higher Following Recent Weakness - U.S. Commentary

(RTTNews) - Stocks showed a strong move to the upside over the course of the trading day on Tuesday after initially showing a lack of direction. With the upward move, the major averages partly offset the weakness seen over the past several sessions.

The major averages moved roughly sideways going into the close, hovering firmly in positive territory. The Dow jumped 189.68 points or 1.1 percent to 17,630.27, the Nasdaq advanced 49.43 points or 1 percent to 5,089.21 and the S&P 500 surged up 25.61 points or 1.2 percent to 2,093.25.

The strength that emerged on Wall Street was partly due to bargain hunting following the sharp pullback seen over the five previous sessions.

With the continued drop seen during trading on Monday, the Dow ended the session at its lowest closing level in almost six months.

A positive reaction to the latest earnings news from some big-name companies also generated some buying interest.

Shares of UPS (UPS) moved sharply higher after the delivery giant reported second quarter earnings that exceeded analyst estimates.

Drug giant Pfizer (PFE) and auto giant Ford (F) also posted strong gains after reporting better than expected second quarter earnings. Pfizer also raised its full-year guidance.

The rebound by stocks also came traders looked ahead to the Federal Reserve's highly anticipated monetary policy announcement on Wednesday.

The Fed is widely expected to leave rates unchanged, but traders will closely analyze the accompanying statement for hints regarding an interest rate hike in September.

Meanwhile, traders largely shrugged off a report from the Conference Board showing a substantial deterioration in U.S. consumer confidence in the month of July.

The Conference Board said its consumer confidence index tumbled to 90.9 in July from 99.8 in June. Economists had expected the index to show a much more modest decrease to a reading of 99.6.

Sector News

Steel stocks moved sharply higher over the course of the trading day, driving the NYSE Arca Steel Index up by 4 percent. With the gain, the index bounced well off the six-year closing low set in the previous session.

Cliffs Natural Resources (CLF) helped to lead the steel sector higher, soaring by 23.8 percent ahead of the release of its second quarter results on Wednesday.

Significant strength was also visible among energy stocks, which moved higher along with the price of crude oil. Crude for September delivery climbed $0.59 to $47.98 a barrel, rebounding from a four-month low.

Reflecting the strength in the energy sector, the Philadelphia Oil Service Index surged up by 3.9 percent, while the NYSE Arca Oil & Gas Index jumped by 3 percent.

Railroad stocks also saw considerable strength, with the Dow Jones Railroads Index climbing by 3.7 percent. Kansas City Southern (KSU) and Union Pacific (UNP) posted standout gains.

Tobacco, biotechnology, trucking and semiconductor stocks also showed strong moves to the upside on the day, reflecting broad based buying interest.

Other Markets

In overseas trading, most stock markets across the Asia-Pacific region moved lower on Tuesday. Japan's Nikkei 225 Index edged down by 0.1 percent, while China's Shanghai Composite Index tumbled by 1.7 percent. However, Hong Kong's Hang Seng Index bucked the downtrend and rose by 0.6 percent.

Meanwhile, the major European markets all moved to the upside on the day. While the U.K.'s FTSE 100 Index advanced by 0.8 percent, the French CAC 40 Index and the German DAX Index jumped by 1 percent and 1.1 percent, respectively.

In the bond market, treasuries moved modestly lower, giving back some ground after trending higher in recent sessions. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 2.2 basis points to 2.25 percent.

Looking Ahead

With the Fed in the spotlight, trading activity on Wednesday may be somewhat subdued in the lead up to the central bank's monetary policy announcement at 2 pm ET.

The news from the Fed is likely to overshadow a report on pending home sales as well as earnings news from companies such as Twitter (TWTR), MasterCard (MA), and Northrop Grumman (NOC).