RTTNews - Stocks are showing a lack of direction in early afternoon trading on Wednesday, swinging between gains and losses despite some largely positive news on the economic front. The major averages have been bouncing back and forth across the unchanged line, marred by choppy trading amid a low volume outing.
Early buying interest was sparked by data on new home sales, which increased by much more than expected in the month of July, according to a report released by the Commerce Department.
Traders also digested a report from the Commerce Department showing a much bigger than expected increase in durable goods orders in the month of July, although the growth was largely due to a substantial rebound in orders for transportation equipment.
In an interview with RTT News, Hugh Johnson, chief investment officer of Johnson Illington Advisors said the recent rally could continue.
There is enough cash to drive the market higher... despite the fact that there are legitimate concerns about being ahead of ourselves. Johnson said. Can the stock market go higher? The answer to that question is clearly yes.
In addition, Johnson said he kind of hopes for a stock market correction, explaining that he'd use the opportunity to add to his equity position. However, Johnson indicated that any sell offs would be within the context of a bull market.
The major averages are currently lingering in negative territory, with the Dow just below the unchanged line. The Dow is currently down 1.89 at 9,537.40, the Nasdaq is down 5.79 at 2,018.44 and the S&P 500 is down 1.07 at 1,026.93.
Biotechnology stocks are continuing to excel despite the day's seesaw movement, with the NYSE Arca Biotechnology Index posting a 4.8 percent gain in early afternoon trading. The index is extending its gains for the sixth straight session and has set a fresh historic intraday high.
Human Genome Sciences (HGSI) continues to help lead the sector higher, benefiting from rumors that it will be taken over by GlaxoSmithKline (GSK). Human Genome Sciences has shot up by 14.7 percent, rising to its best intraday level in seven and a half years.
The index is also being boosted by shares of Myriad Genetics Inc. (MYGN), which have jumped by 16.7 percent after the firm reported fourth quarter earnings that exceeded analyst estimates. The stock is now trading at a two-month intra-day high.
Airline and housing stocks are also seeing substantial moves to the upside, with the NYSE Arca Airline Index and the Philadelphia Housing Sector Index rising by 1.7 percent and 1.5 percent, respectively. The airline index has risen to its highest intraday level in seven and a half months, while the housing index has jumped to its best intraday level in nearly eleven months.
While networking, computer hardware and telecommunication stocks are also on the rise, some weakness remains visible among resource stocks.
Gold and steel stocks are continuing to retreat by notable margins, with the NYSE Arca Gold Bugs Index and the NYSE Arca Steel Index sliding by 1.8 percent and 1.9 percent, respectively. The pullback by resource stocks comes amid a retreat in commodities prices.
Stocks In The News
Williams-Sonoma (WSM) is surging higher in early afternoon trading after reporting surprise second quarter earnings of $0.05, which beat forecasts for a loss of $0.09 per share. Net revenues also exceeded estimates and the firm raised its guidance for the third quarter. The stock has soared by 11.8 percent, setting an eleven month intraday high.
Kirkland's (KIRK) is also gaining ground following its second-quarter earnings report, which showed net income of $0.17 per share, crushing Wall Street estimates of $0.04 per share. Revenues for the quarter totaled $87.7 million, which beat the $83.85 million expected by analysts. Kirkland's is up 10 percent, reaching its best level in roughly three weeks time.
On the other hand, shares of Hain Celestial Group (HAIN) are sliding, as its adjusted fourth quarter earnings of $0.28 per share missed analysts' forecast $0.30 per share. Revenues also failed to meet expectations, coming in at $262.7 million compared to the consensus estimate of $287.43 million. The stock is falling by 7.8 percent, backing further away from a seven and a half month closing high set late last week.
In Focus: Economic Data
As mentioned above, data from the Commerce Department showed that new home sales surged up by 9.6 percent to an annual rate of 433,000 in July from the revised June rate of 395,000. With the increase, new home sales rose to their highest level since September of 2008.
Economists had been expecting sales to edge up to 390,000 from the 384,000 originally reported for the previous month.
New home sales remain down 13.4 percent compared to the same month a year ago, although they have moved well off the record low set in January.
A separate report from the Commerce Department showed that new orders for durable goods jumped 4.9 percent in July following a revised 1.3 percent decrease in June. Economists had expected orders to increase by 3.2 percent compared to the 2.2 percent decrease that had been reported for the previous month.
Excluding an 18.4 percent increase in orders for transportation equipment, durable goods orders increased by a much more modest 0.8 percent in July compared to a 2.5 percent increase in June. The increase came in below economist estimates of 1.0 percent growth.
In overseas trading, stock markets across the Asia-Pacific region closed mostly higher on Wednesday. Japan's benchmark Nikkei 225 Index rose by 1.4 percent, while China's Shanghai Composite Index closed up 1.8 percent.
Meanwhile, the major European markets closed moderately lower. The French CAC 40 Index slid by 0.3 percent, while the German DAX Index and the U.K.'s FTSE 100 Index fell by 0.7 percent and 0.6 percent, respectively.
In the bond markets, treasuries are seeing choppy movement ahead of the five-year note auction set to take place at noon. The yield on the benchmark ten-year note is trading at 3.451 percent, essentially unchanged on the day.
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