Stocks Extend Upward Trend, Lifting Nasdaq To 14-Year High - U.S. Commentary

(RTTNews) - Stocks turned in another strong performance during trading on Tuesday, extending the upward trend seen over the past several sessions. The gains on the day once again lifted the tech-heavy Nasdaq to a new fourteen-year closing high.

The major averages moved roughly sideways going into the close, hovering firmly in positive territory. The Dow climbed 80.85 points or 0.5 percent to 16,919.59, the Nasdaq rose 19.20 points or 0.4 percent to 4,527.51 and the S&P 500 advanced 9.86 points or 0.5 percent to 1,981.60.

The continued strength on Wall Street came following the release of two closely watched reports on consumer price inflation and new residential construction.

Before the start of trading, the Labor Department released a report showing only modest consumer price growth in the month of July, with higher prices for shelter and food offset by decreases in prices for energy and airline fares.

The Labor Department said its consumer price index ticked up by 0.1 percent in July after rising by 0.3 percent in June. The modest increase by the index matched economist estimates.

Excluding food and energy prices, the core consumer price index also inched up by 0.1 percent in July, matching the increase seen in the previous month. Economists had been expecting the core index to edge up by 0.2 percent.

Combined with last week's tame producer price inflation data, the report further offset concerns about the outlook for interest rates.

Meanwhile, the Commerce Department released a separate report showing a substantial rebound by U.S. housing starts in the month of July.

The report said housing starts jumped 15.7 percent to an annual rate of 1.093 million in July after falling 4 percent to a revised 945,000 in June.

With the substantial increase, housing starts rose to their highest level reaching a rate of 1.105 million in November of last year.

Stocks also benefited from easing geopolitical concerns amid news that Russian President Vladimir Putin is due to meet with his Ukrainian counterpart Petro Poroshenko next week.

The Kremlin said Putin will meet with Poroshenko as well as the heads of the Customs Union member-states in Minsk, Belarus, on August 26th.

The meeting between Putin and Poroshenko will mark their first face-to-face talks since June and could be a key step in resolving the ongoing conflict in eastern Ukraine.

Additionally, shares of Dow component Home Depot (HD) moved sharply higher on the day after the home improvement retailer reported better than expected second quarter results and raised its full-year earnings guidance.

Sector News

Extending a recent upward move, housing stocks saw significant strength on the heels of the upbeat housing starts data. The Philadelphia Housing Sector Index surged up by 1.7 percent, reaching its best closing level in almost a month.

Ryland Group (RYL), Lennar (LEN), and D.R. Horton (DHI) turned in some of the housing sector's best performances on the day.

Considerable strength was also visible among retail sales, as reflected by the 1.4 percent gain posted by the Dow Jones Retail Index. Aeropostale (ARO) posted a particularly strong gain, jumping by 19.4 percent amid news that it rehired Julian Geiger as CEO.

Natural gas stocks also showed a strong move to the upside on the day, driving the NYSE Arca Natural Gas Index up by 1.3 percent. The strength in the sector came as natural gas for September delivery climbed $0.085 to $3.877 per million BTUs.

Utilities, networking, and oil service stocks also saw notable strength, moving higher along with most of the other major sectors.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved higher on Tuesday following the positive lead from Wall Street overnight. Japan's Nikkei 225 Index advanced by 0.8 percent, while Hong Kong's Hang Seng Index climbed by 0.7 percent.

The major European markets also moved to the upside on the day. While the German DAX Index jumped by 1 percent, the U.K.'s FTSE 100 Index and the French CAC 40 Index both rose by 0.6 percent.

In the bond market, treasuries turned lower over the course of the trading session after seeing early strength. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 1.8 basis points to 2.405 percent.

Looking Ahead

The outlook for monetary policy is likely to be in focus on Wednesday, as the Federal Reserve is due to release the minutes of its July meeting.

Traders will likely closely analyst the minutes for clues as to how soon the Fed will begin to consider raising interest rates.

On the earnings front, retailers Lowe's (LOW), Staples (SPLS), and Target (TGT) are due to report their quarterly results before the start of trading on Wednesday.