After showing a lack of direction throughout much of the session, stocks moved sharply higher going into the close of trading on Wednesday. The major averages all closed in positive territory after turning in a mixed performance for most of the day.
The choppy trading seen for most of the day came as traders digested a slew of economic reports as well as earnings news from some big-name companies.
On the economic front, the Federal Reserve's Beige Book report showed that overall economic activity has contracted further or remained weak, although it said five of the twelve Fed districts noted a moderation in the pace of decline.
The Beige Book, a compilation of anecdotal evidence on economic conditions in each of the twelve Fed districts, also noted that several districts saw signs that activity in some sectors was stabilizing at a low level.
Earlier in the day, the Labor Department said its consumer price index fell 0.1 percent in March following a 0.4 percent increase the month before. The decline came as a surprise to economists, who had expected prices to edge up 0.1 percent.
Excluding food and energy prices, the core consumer price index rose 0.2 percent for the third consecutive month. Economists had been expecting a 0.1 percent increase in core prices.
Separately, the Fed's industrial production report showed that production fell 1.5 percent in March, while capacity utilization dropped to 69.3 percent. Economists expected industrial production to decline 0.9 percent in March, while capacity utilization was expected to come in at 69.6 percent.
In corporate news, semiconductor giant Intel (INTC) reported first quarter earnings of $0.11 per share on revenues of $7.1 billion. While the results were down year-over-year, they exceeded analyst estimates of earnings of $0.03 per share on revenues of $6.98 billion.
However, Intel disappointed investors by saying that was not providing a revenue outlook for the second quarter at this time due to economic uncertainty and limited visibility. Subsequently, shares of the semiconductor giant closed down 2.4 percent.
Meanwhile, Procter & Gamble Co. (PG) announced an increase in its quarterly dividend to $0.44 per share from $0.40 per share on its common stock. The news drove the stock up 3.2 percent.
In other news, President Obama pledged to reform the tax system Wednesday, calling for a simpler tax system that is fair to the middle-class. Speaking on the day that income taxes are due, the president focused on middle class families facing difficult decisions in the recession, and pledged to restructure the tax system.
For too long, we've seen taxes used as a wedge to scare people into supporting policies that actually increased the burden on working people instead of helping them live their dreams, Obama said. That has to change, and that's the work that we've begun.
While the major averages all closed above the unchanged line, the tech-heavy Nasdaq underperformed the Dow and the S&P 500 by a wide margin. The Nasdaq ended the session up 1.08 points or 0.1 percent at 1,626.80, while the Dow jumped 109.44 points or 1.4 percent to 8,029.62 and the S&P 500 closed up 10.56 points or 1.3 percent at 852.06.
The late-day rally by the major averages was partly due to significant strength that emerged in the banking sector, which moved back to the upside after falling sharply on Tuesday. After ending the previous session down 8.1 percent, the Kbw Bank Index closed up 5.1 percent.
Within the banking sector, Huntington Bancshares (HBAN) turned in one of the sector's best performances, ending the session up 18.2 percent, at its best closing level in well over two months.
Real estate stocks also moved sharply higher over the course of the trading day, driving the Morgan Stanley REIT Index up 8.9 percent. With the gain, the index nearly offset the substantial loss that it posted in the previous session.
Benefiting from the release of a report showing an improvement in homebuilder confidence, housing stocks also showed a strong upward move. The Philadelphia Housing Sector Index closed up 5 percent after the National Association of Home Builders said its Housing Market Index rose to 14 in April.
Strength that emerged in the airline, brokerage, tobacco, and steel sectors also contributed to the strong upward move that was seen in the latter part of the trading day.
Meanwhile, some weakness remained visible in the semiconductor sector, as reflected by the 1.5 percent loss posted by the Philadelphia Semiconductor Index. The weakness in the sector reflected the negative reaction to Intel's earnings news.
While the Dow experienced significant volatility over the course of the trading day, a vast majority of the components of the blue chip index closed above the flat-line.
American Express (AXP) turned in one of the Dow's best performances, with the credit cared giant closing up 11.9 percent. With the advance, shares of American Express ended the session at a new three-month closing high.
The Dow also benefited from significant advances by General Motors (GM) and JP Morgan (JPM), which both ended the session up more than 6 percent.
Pfizer (PFE), Disney (DIS), Bank of America (BAC), and Procter & Gamble were among the other Dow components that ended the session in firmly in positive territory.
Meanwhile, along with Intel, Microsoft (MSFT), McDonald's (MCD), and Citigroup (C) posted notable losses on the day.
In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance on Wednesday. While the markets in Hong Kong and China closed higher, notable weakness was visible in Japan and South Korea.
Meanwhile, the major European markets all ended the day lower, with the French CAC 40 Index and the U.K.'s FTSE 100 both closing down 0.5 percent, while the German DAX Index posted a 0.2 percent loss.
In the bond market, treasuries ended the session above the unchanged line after seeing significant uncertainty. Subsequently, the yield on the benchmark 10-year note closed down 2.7 basis points at 2.759 percent.
The financial sector is likely to be in focus on Thursday, with JP Morgan among the companies due to release their quarterly results before the start of trading. Gannett Co. (GCI), Harley Davidson (HOG), and Southwest Airline (LUV) are also due to report their results.
Trading could also be impacted by the release of reports on housing starts, weekly jobless claims, and manufacturing activity in the Philadelphia area.
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