Stocks experienced considerable volatility over the course of the trading session on Wednesday, with the major averages eventually ending the session firmly in positive territory. The choppy trading came as traders digested some strong economic data combined with weak demand for a U.S. treasury auction.
Some initial buying interest was generated by a report from the Commerce Department revealing that durable goods orders unexpectedly showed a substantial increase in the month of February after falling in each of the six previous months.
The report showed that durable goods orders jumped 3.4 percent in February after falling by a revised 7.3 percent in January. Economists had been expecting durable goods orders to fall by 2.5 percent compared to the 4.5 percent decrease that had been reported for the previous month.
The markets saw some further upside after the Commerce Department released a separate report showing an unexpected increase in new home sales in the month of February. This marked the latest in recent string of positive housing market data.
The Commerce Department said that new home sales rose 4.7 percent to an annual rate of 337,000 in February from an upwardly revised January rate of 322,000. The results surprised economists, who had been expecting sales to fall to 300,000 from the 309,000 originally reported for the previous month.
Stocks were unable to sustain the upward move, however, as investors remained skeptical that the better than expected data signals a turnaround for the economy.
After hovering in positive territory for much of the morning, stocks showed a substantial turnaround over the course of the afternoon amid a negative reaction to the release of the results of the Treasury Department's auction of $34 billion worth of five-year notes. The auction drew a yield of 1.849 percent and a bid-to-cover ratio of 2.02.
With the bid-to-cover ratio, an indicator of demand, coming in below the 2.21 from the Treasury's previous auction of $32 billion in five-year notes last month, the auction results raised some concerns about demand for U.S. government debt. The major averages subsequently pulled back well off their highs and into the red.
Nonetheless, stocks moved back to the upside going into the close, lifting the major averages back into positive territory. The Dow closed up 89.84 points or 1.2 percent at 7,749.81, the Nasdaq closed up 12.43 points or 0.8 percent at 1,528.95 and the S&P 500 closed up 7.63 points or 1 percent at 813.88.
Renewed strength in the banking sector contributed to the late-day rebound by the broader markets, with the Kbw Bank Index closing up 4.9 percent after bouncing back and forth across the unchanged line over the course of the afternoon.
Capital One (COF) helped to lead the sector higher, with the financial services provider closing up 8.6 percent. Fifth Third Bancorp (FITB) and U.S. Bancorp (USB) also posted strong gains.
Housing stocks also showed a strong move back to the upside going into the close, driving the Philadelphia Housing Index up 3.3 percent. With the gain, the index more than offset the 1.6 percent loss it posted on Tuesday to end the session at its best closing level in well over a month.
The late-day rebound by the major averages also reflected renewed strength among gold, airline, brokerage, and health insurance stocks. The strength among gold stocks came as the price of the precious metal rose $12 to $938 an ounce.
On the other hand, some weakness remained visible among railroad stocks, as reflected by the 2.8 percent loss posted by the Dow Jones Railroad Index. Some computer hardware stocks are also remained stuck firmly in negative territory.
A majority of the Dow components ended the day in positive territory, contributing to the gain posted by the blue chip index. Reflecting the strength in the banking sector, JP Morgan (JPM) and Bank of America (BAC) turned in two of the Dow's best performances.
Alcoa (AA) also showed a strong upward move over the course of the trading session, with the aluminum producer closing up 5.5 percent. With the gain, shares of Alcoa ended the day at their best closing level since early February.
The higher close by the Dow also reflected notable gains by McDonald's (MCD), Boeing (BA), Pfizer (PFE), and Procter & Gamble (PG), which all closed up more than 2 percent.
At the other end of the spectrum, General Motors (GM) suffered one of the biggest losses of the session, closing down 6.6 percent. With the loss, GM pulled back further off the nearly two-month closing high that it set on Monday.
Additionally, Citigroup (C), Caterpillar (CAT), and Verizon (VZ) also posted notable losses, limiting the upside for the Dow.
In overseas trading, stock markets across the Asia-Pacific market turned in a mixed performance on Wednesday. While Japan's benchmark Nikkei 225 Index fell 0.1 percent, South Korea's KOSPI posted a gain of 0.6 percent.
The major European markets also closed mixed on the day. The U.K.'s FTSE 100 Index ended the session down 0.3 percent, while the French CAC 40 Index and the German DAX Index posted gains of 0.7 percent and 0.9 percent, respectively.
In the bond market, treasuries made a notable move to the downside due to the weak demand for the five-year note auction. Subsequently, the yield on the benchmark 10-year note closed up 11.8 basis points at 2.772 percent.
The Labor Department's report on weekly jobless claims will likely influence trading on Thursday, while investors will also keep an eye on the Commerce Department's final report on fourth quarter.
Additionally, Paychex (PAYX), Red Hat (RHT), and CKE Restaurants (CKR) are among the companies that have released their quarterly results after the close of trading today, while Best Buy (BBY), ConAgra (CAG), and Gamestop (GME) are among the companies due to release their results before the open on Thursday.
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