Stocks End Firmly Positive On Europe Rally, Higher Oil Prices - U.S. Commentary

(RTTNews) - After ending the previous session mostly higher, stocks saw some further upside during trading on Tuesday. With the strong gains on the day, the major averages further offset the sharp pullback that was seen last week.

The major averages ended the day firmly in positive territory but off their highs for the session. The Dow advanced 156.41 points or 0.9 percent to 17,524.91, the Nasdaq climbed 43.13 points or 0.9 percent to 4,995.36 and the S&P 500 jumped 21.47 points or 1.1 percent to 2,043.41.

The strength on Wall Street partly reflected a positive reaction to a rally by European stocks, which moved higher for the first time in six days.

An increase by the price of crude oil also generated buying interest, as crude for January delivery jumped $1.04 to $37.35 a barrel.

The price of crude oil closed higher for the second consecutive session, rebounding further off the nearly seven year closing low set last Friday.

Meanwhile, traders were also looking ahead to the Federal Reserve's monetary policy announcement scheduled for tomorrow afternoon.

The Fed is widely expected to raise interest rates, but traders are likely to pay close attention to the wording of the accompanying statement to gain clues about the outlook for policy.

On the economic front, the Labor Department released a report before the start of trading showing that consumer prices were flat in the month of November.

The Labor Department said its consumer price index was unchanged in November after rising by 0.2 percent in October. The flat reading matched economist estimates.

Excluding food and energy prices, the core consumer price index rose by 0.2 percent in November, matching the increases seen in the two previous months as well as expectations.

The National Association of Home Builders also released a report showing an unexpected deterioration in homebuilder confidence in the month of December.

The report said the NAHB/Wells Fargo Housing Market Index edged down to 61 in December from 62 in November. The drop surprised economists, who had expected the index to inch up to 63.

A separate report from the New York Federal Reserve showed that regional manufacturing activity contracted for the fifth straight month in December, although the pace of decline slowed more than expected.

Sector News

Oil service stocks saw substantial strength on the day, benefiting from the increase by the price of crude oil. Reflecting the strength in the sector, the Philadelphia Oil Service Index surged up by 3.1 percent.

Rowan (RDC), Transocean (RIG), and Helmerich & Payne (HP) turned in some of the oil service sector's best performances on the day.

Considerable strength was also visible among biotechnology stocks, as reflected by the 3.4 percent gain posted by the NYSE Arca Biotechnology Index. The index rebounded after ending the previous session at its lowest closing level in well over a month.

Banking stocks also showed a strong move to the upside, resulting in a 3 percent gain by the Dow Jones Banks Index. Comerica (CMA) and Regions Financial (RF) posted standout gains.

Brokerage, electronic storage, airline and telecom stocks also turned in strong performances, reflecting broad based buying interest on Wall Street.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Tuesday. Japan's Nikkei 225 Index tumbled by 1.7 percent, while Hong Kong's Hang Seng Index edged down by 0.2 percent.

Meanwhile, the major European markets moved sharply higher on the day. While the U.K.'s FTSE 100 Index surged up by 2.5 percent, the German DAX Index and the French CAC 40 Index soared by 3.1 percent and 3.2 percent, respectively.

In the bond market, treasuries saw further downside following the sharp pullback seen in the previous session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, climbed 4.3 basis points to 2.268 percent.

Looking Ahead

The Fed decision will be in the spotlight on Wednesday, likely overshadowing reports on housing starts and industrial production.