RTTNews - Following a strong start, stocks continued to move higher throughout much of Wednesday's trading session, largely fueled by trader reaction to the day's earnings data. The major averages all posted substantial gains on the day, extending their gains for the third straight session.

Early strength came amid reaction to a slew of earnings reports, spearheaded by Intel (INTC), which beat analysts' second quarter earnings estimates. While Yum! Brands (YUM) also beat expectations, Abbott Labs (ABT) and Altera (ALTR) reported earnings that came in line with estimates.

Stocks were further bolstered in the afternoon following the Federal Reserve's announcement that it expects a less severe economic contraction in 2009 and a moderately stronger recovery in 2010.

The minutes of the June meeting of the Federal Open Market Committee showed that the GDP estimates were revised to show a smaller than expected decrease in 2009 and a bigger than expected increase in 2010.

At the same time, the Fed said it expects the unemployment rate to come in higher than previously estimated based on the incoming employment data.

The day's influx of economic figures was kicked off this morning by a Labor Department report showing that consumer prices saw a 0.7 percent increase in June compared to the previous month. Economists had projected an advance of about 0.6 percent.

Compared to the same period last year, consumer prices were down 1.4 percent, the largest year-over-year decline since 1950.

Core prices, which exclude the volatile food and energy sectors, advanced 0.2 percent compared to the previous month. Economists had expected an increase of 0.1 percent.

In a separate report, the New York Fed said that conditions for New York manufacturers were roughly flat in July, with the index of activity in the sector rising to a level close to zero.

A separate report from the Federal Reserve indicated a continued decrease in industrial production in the month of June, although the rate of decline slowed by more than economists had been anticipating.

With the slowdown, industrial production fell at its slowest pace since the 1.3 percent jump that was seen in October of 2008.

The major averages saw further upside in late day trading, finishing near their best levels of the day. The Dow closed up by 256.72 points or 3.1 percent at 8,616.21, the Nasdaq climbed 63.17 points or 3.5 percent to 1,862.90, and the S&P 500 rose 26.84 points or 3 percent to 932.68.

Sector News

Resource stocks turned in some of the day's best performances, with steel and gold stocks advancing by substantial margins. The NYSE Arca Steel Index closed up by 7.1 percent, while the NYSE Arca Gold Bugs Index rose by 4.6 percent.

Both the steel and gold indices were able to move further off the roughly two month closing lows set last week, with gold stocks boosted by an increase in the price of the precious metal.

Technology-related stocks also surged higher based on Intel's earnings. Networking, semiconductor, and software stocks are all posting strong gains. Notably, the NYSE Arca Software Index rose by 4.2 percent on the day, closing at its best level in over nine months.

Additionally, airline, housing and banking stocks also saw strong moves to the upside. The NYSE Arca Airline Index and the Philadelphia Housing Sector Index rose by 5.6 percent and 4.4 percent, respectively. The airline index finished the day at its best closing level in two months.

Further, the Kbw Bank Index jumped by 4.3 percent, closing at its best level in just over a month. Financial stocks continued their strong performance, as some TARP funds have been returned to the government, indicating that the banking crisis may be winding down.

On the other hand, trucking stocks were among the few groups that bucked the uptrend, with the Dow Jones Trucking Index posting a loss of 2.2 percent.

Dow Components

Nearly all of the Dow components ended the day in positive territory, contributing to the standout gain that was posted by the blue chip index.

American Express (AXP) was the Dow's strongest performer, with the credit card giant surging by 11.3 percent. With the upward move, the stock closed at its best price in over two months.

Intel also turned in an outstanding performance, posting a gain of 7.3 percent on the day. The advance lifted shares the semiconductor giant to their best closing level in just over nine months.

Cisco (CSCO), DuPont (DD) and General Electric (GE) also saw considerable strength, extending their gains for the fourth straight session and finishing at one-month closing highs.

Caterpillar (CAT), Alcoa (AA), Hewlett Packard (HPQ) and JP Morgan Chase (JPM) also posted notable gains, reflecting the day's strength in a variety of segments. McDonald's (MCD) on the other hand, was the only Dow component to close lower, sliding by 0.7 percent on the day.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region saw another day of gains on Wednesday, with Hong Kong's Hang Seng Index climbing by 2.1 percent. Japan's benchmark Nikkei 225 Index edged up by a more modest 0.1 percent.

The major European markets also closed on the upside for the third session in a row, with the German DAX Index and the French CAC 40 Index closing up by 3.1 percent and 2.9 percent, respectively. The U.K.'s FTSE 100 Index also moved higher, climbing by 2.6 percent.

In the bond markets, treasuries saw steep losses amid the rally on Wall Street. Subsequently, the yield on the note, which moves opposite of its price, closed at 3.596 percent, a gain of 14.9 basis points on the day.

Looking Ahead

Looking ahead, traders are likely to react to results from Xilinx (XLNX) and Cintas (CTAS), which reported their quarterly results after the close of trading today. Additionally, Harley Davidson (HOG) and Marriott International (MAR) are set to report ahead of the start of trading on Thursday.

Traders will also focus on the closely watched weekly employment data from the Labor Department. Economists expect first time jobless claims for the week ended June 11th to fall to 552,000 from 565,000 in the previous week. The report will be released at 8:30 a.m. ET.

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