Stocks Rally Amid Substantial Rebound By Deutsche Bank - U.S. Commentary

(RTTNews) - Stocks moved sharply higher over the course of the trading session on Friday, benefiting from a substantial rebound by shares of Deutsche Bank. With the gains, the major averages more than offset the pullback seen in the previous session.

The major averages pulled back off their highs of the session going into the close but remained firmly positive. The Dow jumped 164.70 points or 0.9 percent to 18,308.15, the Nasdaq advanced 42.85 points or 0.8 percent to 5,312.00 and the S&P 500 climbed 17.14 points or 0.8 percent to 2,168.27.

With the strength on the day, the major averages closed modestly higher for the week. The Dow rose by 0.3 percent, while the S&P 500 and the Nasdaq inched up by 0.2 percent and 0.1 percent, respectively.

The rally on Wall Street came as Deutsche Bank jumped by 14 percent after plunging by 6.7 percent to a record closing low in the previous session.

Deutsche Bank benefited from an AFP report indicating the German financial giant is nearing a $5.4 billion settlement with the U.S. Justice Department over its mortgage lending activities before the financial crisis.

On the economic front, the Commerce Department released a report before the start of trading showing an uptick in personal income in the month of August.

The report said personal income edged up by 0.2 percent in August after climbing by 0.4 percent in July. The modest increase in income matched economist estimates.

Meanwhile, the Commerce Department said personal spending was virtually unchanged in August following a 0.4 percent increase in July. Economists had been expecting spending to rise by 0.2 percent.

A reading on inflation said to be preferred by the Federal Reserve showed that core consumer prices rose by 0.2 percent in August, matching expectations. The annual rate of growth accelerated to 1.7 percent from 1.6 percent.

MNI Indicators also released a report showing a faster than expected acceleration in the pace of growth in Chicago-area business activity in September.

The Chicago business barometer jumped to 54.2 in September from 51.5 in August, with a reading above 50 indicating growth in regional business activity. Economists had expected the index to inch up to 52.0.

A separate report from the University of Michigan showed an improvement in consumer sentiment in the month of September.

The University of Michigan said its consumer sentiment index for September was upwardly revised to 91.2 from the preliminary reading of 89.8.

The final reading on the consumer sentiment index for September is up from 89.8 in August and above economist estimates for a reading of 90.1.

Sector News

After coming under pressure in the previous session, financial stocks showed a strong move back to the upside along with shares of Deutsche Bank.

Reflecting the strength in the financial sector, the NYSE Arca Broker/Dealer Index and the Dow Jones Banks Index surged up by 2.2 percent and 1.6 percent, respectively.

Considerable strength was also visible among computer hardware stocks, as reflected by the 2.2 percent gain posted by the NYSE Arca Computer Hardware Index. With the gain, the index reached its best closing level in over a year.

Printer maker Lexmark (LXK) led the hardware sector higher after U.S. regulators cleared its proposed buyout by an Asia-based consortium.

Oil service stocks also saw significant strength, adding to the strong gains posted in the two previous sessions. The Philadelphia Oil Service Index climbed 1.6 percent to a one-month closing high.

Semiconductor, transportation, and biotechnology stocks also saw notable strength on the day, moving higher along with most of the other major sectors.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Friday. Japan's Nikkei 225 Index and Hong Kong's Hang Seng Index plunged by 1.5 percent and 1.9 percent, respectively, although China's Shanghai Composite Index bucked the downtrend.

Meanwhile, the major European markets turned in a mixed performance on the day. While the U.K.'s FTSE 100 Index fell by 0.3 percent, the French CAC 40 Index inched up by 0.1 percent and the German DAX Index jumped by 1 percent.

In the bond market, treasuries turned lower over the course of the session after seeing initial strength. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, climbed 5.1 basis points to 1.608 percent.

Looking Ahead

The monthly employment report is likely to be in the spotlight next week, although data on manufacturing and service sector activity may attract attention in the days leading up to the jobs report next Friday.