RTTNews - After seeing some initial weakness, stocks staged a substantial rally over the course of the trading day on Tuesday, snapping a four-day losing streak. The major averages finished near their best levels of the day, bolstered by some positive news on the health of the U.S. consumer.

The Conference Board's reading on consumer confidence for May improved by far more than expected, reaching its highest level since September. The data generated some optimism about the outlook for consumer spending, which accounts for nearly two-thirds of economic activity.

The consumer confidence figure helped to bolster some of the day's risk appetite, as reflected by the surge in equities following the release of the report.

Earlier in the day, disappointing housing price data contributed to the initial weakness. Traders largely shrugged off the data, however, citing the lagging nature of the numbers and choosing to focus on the encouraging consumer confidence data.

The major averages moved roughly sideways in the second half of the day, holding onto strong gains. The Dow closed up 196.17 points or 2.4 percent at 8,473.49, the Nasdaq rose 58.42 points or 3.5 percent to 1,750.43 and the S&P 500 closed up 23.33 points or 2.6 percent at 910.33.

Sector News

Most of the major sectors showed notable strength on the day, helping the major averages to finish substantially higher.

Retail stocks enjoyed a considerable run-up on the day, benefiting from the better than expected consumer confidence data. The S&P Retail Index closed up 4 percent, although it remains well off the seven-month highs that it set earlier this month.

Among retail stocks, Chico's Fas (CHS) showed a strong upward move ahead of the release of its first quarter results before the start of trading on Wednesday. Shares of Chico's FAS closed up 10.2 percent, at its best closing level in over a year.

Commercial real estate stocks also bolstered the markets, with the Morgan Stanley Real Estate Index climbing by 6.5 percent. Transportation stocks were also among the day's strongest performers, with the Dow Jones Transportation Average closing up by 4.1 percent.

While computer hardware, banking and housing stocks also advanced significantly, gold stocks bucked the day's uptrend. The losses by gold stocks came in tandem with a drop in the price of the precious metal.

Dow Components

Nearly all of the Dow components finished in positive territory on the day, contributing to the solid triple digit gain by the blue chip index.

JP Morgan Chase (JPM) and American Express (AXP) led the Dow higher, rising by 6.2 and 5.0 percent, respectively. Steel producer Alcoa (AA) also saw considerable upside on the day, finishing up by 4.6 percent.

McDonald's (MCD) extended its winning streak, advancing by 3.1 percent on the day. With the upward move, shares of the fast food giant ended the session at their best closing level in over three months.

Additionally, AT&T (T) offset some of its recent losses, climbing by 3.5 percent on the session. With the advance, the stock moved further the two-month low set late last week.

On the other hand, Coca-Cola (KO) finished as one of two Dow components in negative territory, with the beverage giant slipping by 0.2 percent. The modest loss by Coca-Cola came after it ended Friday's trading session at a seven-month closing high.

Shares of Bank of America (BAC) also dipped on the day, sliding by 0.8 percent despite being upgraded to market perform from underperform by FBR Capital.

In Focus: Economic Reports, Obama Supreme Court Nomination

On the economic front, consumer confidence showed a substantial improvement in the month of May. A report from the Conference Board showed that the consumer confidence index rose to its highest level in eight months.

The consumer confidence index rose to 54.9 in May from an upwardly revised 40.8 in April. Economists had expected the index to edge up to 42.6 from the 39.2 originally reported for the previous month.

Meanwhile, a report released by Standard & Poor's showed that home prices continued to show record declines in the first quarter, with the data suggesting that the recent signs of stabilization in the housing market have not yet led to a turnaround in prices.

The data showed that the S&P/Case-Shiller U.S. National Home Price Index fell 19.1 percent in the first quarter compared to the same quarter a year ago. The decrease marked the steepest decline in the series' 21-year history.

S&P added that the 20-City Composite Home Price Index fell at an annual rate of 18.7 percent in March compared to economist estimates of an 18.4 percent decline. The 10-City Composite Home Price Index for March was down 18.6 percent year-over-year.

In other news, President Barack Obama officially named Judge Sonia Sotomayor as his nominee for Supreme Court Justice late this morning. If confirmed, Sotomayor would become only the third woman to serve on the court and the first Hispanic.

Sotomayor, 54, currently serves on the United States Court of Appeals for the Second Circuit. She is nominated to replace retiring Supreme Court Justice David Souter, who is known for his moderate views. So, if confirmed, Sotomayor is not expected to shift the ideological balance of the court.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region finished mostly lower on Tuesday. Japan's benchmark Nikkei 225 Index slipped by 0.4 percent and Hong Kong's Hang Seng Index fell 0.8 percent.

Meanwhile, the major European markets closed notably higher after seeing some earlier weakness. The U.K.'s FTSE 100 Index closed up 1.1 percent, while the French CAC 40 Index and the German DAX are finished up by 1.1 percent and 1.3 percent, respectively.

In the bond markets, treasuries closed modestly lower amid the rally on Wall Street. Subsequently, the yield on the benchmark ten-year note closed up by 4.5 basis points at 3.493 percent.

Looking Ahead

Trading on Wednesday is likely to be impacted by the release of additional housing data from the National Association of Realtors. The trade group will release their report on existing home sales in April at 10 am ET, with sales expected to tick up to a 4.66 million annual rate.

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