Stocks Extend Rally On Chinese Rate Cut, Upbeat Tech Earnings - U.S. Commentary

(RTTNews) - Extending the rally seen over the course of the previous session, stocks moved sharply higher during trading on Friday. The gains on the day lifted the major averages to their best closing levels in at least two months.

The major averages all closed firmly positive, although the Nasdaq outperformed its counterparts. While the Nasdaq soared 111.81 points or 2.3 percent to 5,031.86, the Dow climbed 157.54 points or 0.9 percent to 17,646.70 and the S&P 500 advanced 22.64 points or 1.1 percent to 2,075.15.

With the sharp increase seen over the past two days, the major averages closed substantially higher for the week. The Nasdaq surged up by 3 percent, while the Dow jumped by 2.5 percent and the S&P 500 shot up by 2.1 percent.

The continued rally on Wall Street partly reflected a positive reaction to news China's central bank unexpectedly lowered interest rates.

The People's Bank of China cut both the one-year lending rate and the deposit rate by a quarter-point, marking the sixth rate cut since last November.

In a statement, the central bank noted a need to continue the flexible use of monetary policy tools to create an environment for stable and healthy economic development.

Following yesterday's comments from European Central Bank President Mario Draghi, the news added to optimism the global central banks will provide further stimulus.

Additionally, the markets benefited from strong gains by three tech giants that reported their quarterly results after the close of trading on Thursday.

Shares of Microsoft (MSFT) moved sharply higher after the software giant reported better than expected fiscal first quarter results. The results received a boost from the company's cloud business.

Google parent Alphabet (GOOG) and online retailer Amazon (AMZN) also posted notable gains after reporting quarterly earnings that exceeded estimates.

Shares of Procter & Gamble (PG) also moved to the upside after the consumer products giant reported better than expected first quarter earnings.

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 3.1 percent. Seabridge Gold (SA) posted a standout gain, surging up by 12.4 percent.

The strength among gold stocks came despite a decrease by the price of the precious metal, as gold for December delivery fell $3.30 to $1,162.80 an ounce.

Significant strength was also visible among computer hardware stocks, as reflected by the 3.1 percent gain posted by the NYSE Arca Computer Hardware Index. Super Micro Computer (SMCI) helped lead the way higher after reporting first quarter results that came in line with estimates.

Electronic storage, internet, and networking stocks also moved notably higher, reflecting strength throughout the tech sector.

Pharmaceutical, biotechnology, and financial stocks also saw considerable strength, while utilities and natural gas stocks bucked the uptrend.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved higher on Friday following the overnight rally on Wall Street. Japan's Nikkei 225 Index surged up by 2.1 percent, while Hong Kong's Hang Seng Index jumped by 1.3 percent.

The major European markets also showed strong moves to the upside on the day. While the U.K's FTSE 100 Index advanced by 1.1 percent, the French CAC 40 Index and the German DAX Index soared 2.5 percent and 2.9 percent, respectively.

In the bond market, treasuries came under pressure amid the news of the Chinese rate cut and the continued strength among stocks. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, climbed 5.8 basis points to 2.083 percent.

Looking Ahead

The Federal Reserve is likely to move back into the spotlight next week, as the central bank is due to announce its latest monetary policy decision on Wednesday.

While the Fed is widely expected to leave interest rates unchanged, traders will be keeping a close eye on the accompanying statement.

Economic data may also attract some attention, with reports on new home sales, durable goods orders, third quarter GDP, and personal income and spending among those due to be released next week.

On the earnings front, Apple (AAPL), Chevron (CVX), DuPont (DD), Exxon Mobil (XOM), Merck (MRK), Pfizer (PFE), and Twitter (TWTR) are among the companies due to report their quarterly results.