U.S. Stocks Rally On Upbeat Economic, Coronavirus News

(RTTNews) - Stocks moved significantly higher over the course of the trading session on Wednesday, with the Nasdaq and the S&P 500 reaching new record closing highs. The Dow spent the morning lingering in the red before joining the other major averages in positive territory.

While the Dow rose 83.48 points or 0.3 percent to a six-month closing high of 28,331.92, the Nasdaq surged up 198.59 points or 1.7 percent to 11,665.06 and the S&P 500 jumped 35.11 points or 1 percent to 3,478.73.

The strength on Wall Street partly reflected optimism about the outlook for the economy after a report from the Commerce Department showed durable goods orders spiked by much more than expected in the month of July.

The Commerce Department said durable goods orders skyrocketed by 11.2 percent in July after surging up by a revised 7.7 percent in June.

Economists had expected durable goods orders to increase by 4.3 percent compared to the 7.6 percent jump that had been reported for the previous month.

The bigger than expected leap in durable goods orders was primarily due to a sharp increase in orders for transportation equipment, which soared by 35.6 percent.

Excluding the substantial increase in orders for transportation equipment, durable goods orders rose by a much more modest 2.4 percent in July after climbing by 4.0 percent in June. The increase still exceeded estimates for 2.0 percent growth.

The report also said orders for non-defense capital goods excluding aircraft, a reading on business spending, climbed by 1.9 percent in July after surging up by 4.3 percent in June.

"With core orders now back close to pre-pandemic levels, the recovery in business equipment investment looks pretty V-shaped to us," said Michael Pearce, Senior U.S. Economist at Capital Economics.

Adding to the positive sentiment, biotechnology company Moderna (MRNA) announced promising results from a small trial of its coronavirus vaccine candidate in elderly patients.

Moderna told a government advisory committee that its experimental vaccine produced neutralizing antibodies and appeared to be well tolerated.

Sector News

Software stocks turned in some of the market's best performances on the day, with the Dow Jones U.S. Software Index soaring by 4.5 percent to a new record closing high.

Newly named Dow component Salesforce.com (CRM) led sector higher, with the business software company spiking by 26 percent after reporting better than expected second quarter results and raising its full-year revenue guidance.

Significant strength was also visible among gold stocks, as reflected by the 2.8 percent jump by the NYSE Arca Gold Bugs Index.

The rally by gold stocks came amid a sharp increase by the price of the precious metal, with gold for December delivery skyrocketing $29.40 to $1,952.50 an ounce.

Retail stocks also showed a substantial move to the upside on the day, driving the Dow Jones U.S. Retail Index up by 2.4 percent to a record closing high.

Urban Outfitters (URBN) and Dick's Sporting Goods (DKS) posted standout gains after reporting much better than expected quarterly results.

On the other hand, energy stocks came under pressure over the course of the session despite an uptick by the price of crude oil. Crude for October delivery inched up $0.04 to $43.39 a barrel

Reflecting the weakness in the energy sector, the Philadelphia Oil Service Index plunged by 3 percent, the NYSE Arca Natural Gas Index tumbled by 2.9 percent and the NYSE Arca Oil Index slumped by 2.1 percent.

Airline, utilities and banking stocks also saw considerable weakness on the day, partly offsetting the strength in the aforementioned sectors.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Wednesday. Japan's Nikkei 225 Index closed just below the unchanged line, while China's Shanghai Composite Index tumbled by 1.3 percent.

Meanwhile, European stocks moved mostly higher on the day. The German DAX Index jumped by 1 percent, the French CAC 40 Index advanced by 0.8 percent and the U.K.'s FTSE 100 Index inched up by 0.1 percent.

In the bond market, treasuries climbed well off their worst levels to end the session nearly unchanged. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, inched up by less than a basis point to 0.687 percent.

Looking Ahead

Trading on Thursday may be driven by reaction to Federal Reserve Chair Jerome Powell's live-streamed speech at the Jackson Hole economic symposium.

Analysts have suggested Powell will signal an increased tolerance for higher inflation, with some predicting he will call for a shift to "average inflation" targeting rather than the long-standing 2 percent target.

Powell's highly anticipated speech could overshadow reports on weekly jobless claims, second quarter GDP, and pending home sales.