Stocks Rally Amid Continued Pullback By Treasury Yields - U.S. Commentary

(RTTNews) - After initially moving higher, stocks saw further upside over the course of the trading session on Friday. The major averages showed a significant advance after ending the previous session on opposite sides of the unchanged line.

The major averages ended the session at their best levels of the day. The Dow jumped 347.51 points or 1.4 percent to 25,309.99, the Nasdaq soared 127.31 points or 1.8 percent to 7,337.39 and the S&P 500 shot up 43.34 points or 1.6 percent to 2,747.30.

With the rally on the day, the major averages moved higher for the week. The Nasdaq surged up by 1.4 percent, while the S&P 500 and the Dow rose by 0.6 percent and 0.4 percent, respectively.

A continued drop by treasury yields contributed to the rally on Wall Street, with the ten-year yield pulling back further off the four-year closing high set on Wednesday.

The continued rebound by treasuries came as the Federal Reserve issued its monetary policy report to Congress, with the central bank hinting that it still plans three interest rates hikes in 2018.

"The federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run," the Fed said, suggesting a gradual pace of rate hikes.

Light trading activity may have exaggerated the upward move, as some traders stayed on the sidelines amid a lack of major U.S. economic data.

Among individual stocks, shares of Blue Buffalo (BUFF) moved sharply higher after the natural pet food maker agreed to be acquired by General Mills (GIS) for approximately $8 billion in cash.

Information technology company Hewlett Packard Enterprise (HPE) also saw significant strength after reporting better than expected fiscal first quarter results and providing upbeat guidance. HPE also announced a 50 percent dividend increase.

On the other hand, shares of Wingstop (WING) came under pressure after the chicken wing restaurant reported better than expected fourth quarter results but provided disappointing guidance.

Sector News

Oil service stocks showed a significant move to the upside on the day, driving the Philadelphia Oil Service Index up by 2.8 percent.

The strength among oil service stocks came as crude oil for April delivery climbed $0.78 to $63.55 a barrel after surging up $1.09 to $62.77 a barrel on Thursday.

Considerable strength was also visible among utilities stocks, as reflected by the 2.6 percent jump by the Dow Jones Utilities Average. The interest rate-sensitive sector likely benefited from the continued pullback by treasury yields.

Semiconductor, natural gas, biotechnology, and telecom stocks also moved notably higher on the day, reflecting broad based buying interest on Wall Street.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Friday. Japan's Nikkei 225 Index advanced by 0.7 percent, while Hong Kong's Hang Seng Index jumped by 1 percent.

Meanwhile, the major European markets turned in a mixed performance on the day. While the U.K.'s FTSE 100 Index edged down by 0.1 percent, the French CAC 40 Index and the German DAX Index both crept up by 0.2 percent.

In the bond market, treasuries extended the rebound seen over the course of the previous session. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 4.6 basis points to 2.871 percent.

Looking Ahead

Economic data may be in focus next week, with traders likely to keep an eye on reports on new home sales, durable goods orders, consumer confidence, personal income and spending, and manufacturing activity.

Congressional testimony by new Federal Reserve Chairman Jerome Powell is also likely to attract next Wednesday amid lingering concerns about the outlook for interest rates.

On the earnings front, Tenet Healthcare (THC), Macy's (M), Toll Brothers (TOL), Priceline (PCLN), Lowe's (LOW), Office Depot (ODP), Best Buy (BBY), Broadcom (AVGO), Gap (GPS), Big Lots (BIG), and J.C. Penney (JCP) are among the companies due to report their quarterly results next week.