Stocks Recover From Early Decline To Close Firmly Positive - U.S. Commentary

(RTTNews) - Stocks showed a significant turnaround over the course of the trading session on Wednesday after seeing early weakness. With the rebound on the day, the major averages largely offset the pullback that was seen in the previous session.

The major averages ended the day firmly in positive territory, just off their highs for the session. The Dow rose 78.00 points or 0.4 percent to 17,918.62, the Nasdaq advanced 36.26 points or 0.8 percent to 4,859.16 and the S&P 500 climbed 11.18 points or 0.5 percent to 2,099.73.

The early weakness on Wall Street extended the pullback seen on Tuesday amid lingering concerns about the impact of Britain's vote to leave the European Union.

The so-called Brexit vote has raised global growth worries, leading some traders to move their money into safe havens such as U.S. government bonds.

However, the negative sentiment was partly offset by the release of a report from the Institute for Supply Management showing faster than expected growth in the U.S. service sector activity in the month of June.

The ISM said its non-manufacturing index jumped to 56.5 in June from 52.9 in May, with a reading above 50 indicating growth in the service sector. Economists had expected the index to inch up to 53.3.

With the bigger than expected increase, the non-manufacturing index rose to its highest level since reaching 56.6 last November.

Andrew Hunter, Assistant Economist at Capital Economics, said, "The rebound in the ISM index reinforces our view that the U.S. economy remains on a firm footing."

"Following an acceleration to around 3% annualized in the second quarter, we still expect GDP growth to reach a solid 2% for 2016 as a whole," he added.

Stocks saw continued strength in afternoon trading following the release of the minutes of the Federal Reserve's latest monetary policy meeting.

The minutes noted that participants generally thought it would be prudent to wait for the outcome of the so-called Brexit vote before making any changes to monetary policy.

Members generally agreed to wait to assess the consequences of the U.K. vote as well as for additional labor market data before assessing whether another step in removing monetary accommodation was warranted.

Following the U.K.'s vote to leave the EU, most analysts expect the Fed to remain on hold at its next meeting later this month.

Sector News

Gold stocks showed a substantial move to the upside on the day, drive the NYSE Arca Gold Bugs Index up by 3.1 percent. With the gain, the index reached a nearly three-year closing high.

The rally by gold stocks came amid an increase by the price of the precious metal, as gold for August delivery climbed $8.40 to a two-year closing high of $1,367.10 an ounce.

Biotechnology stocks also moved notably higher on the day, resulting in a 1.9 percent jump by the NYSE Arca Biotechnology Index. The gain lifted the index to its best closing level in almost a month.

Significant strength also emerged among housing stocks, as reflected by the 1.8 percent gain posted by the Philadelphia Housing Sector Index.

Within the housing sector, Radian Group (RDN) posted a standout gain after the company enhanced its liquidity by redeeming a $325 million surplus note and said it will accelerate its capital plan.

Natural gas, health care, and steel stocks also turned higher as the trading session progressed, contributing to the rebound by the broader markets.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Wednesday. Japan's Nikkei 225 Index plunged by 1.9 percent, while Hong Kong's Hang Seng Index slumped by 1.2 percent.

The major European markets also showed notable moves to the downside on the day. While the U.K.'s FTSE 100 Index tumbled by 1.3 percent, the German DAX Index and the French CAC 40 Index plummeted by 1.7 percent and 1.9 percent, respectively.

In the bond market, treasuries turned lower over the course of the session after seeing early strength. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 1.8 basis points to 1.385 percent.

Looking Ahead

Reports on private sector employment and weekly jobless claims are likely to attract attention on Thursday, although trading activity may be subdued ahead of the more closely watched monthly jobs report on Friday.