With traders reacting positively to the latest economic news, stocks are seeing substantial strength in early afternoon trading on Wednesday. Easing concerns about the impact of the swine flu outbreak has also helped to push the markets higher.

The strength in the markets also comes on the heels of some positive earnings news, with media giant Time Warner (TWX) reporting adjusted first quarter earnings that fell year-over-year but still came in better than expected.

While a report released by the Commerce Department before the start of trading showed that gross domestic product fell by more than expected in the first quarter, the decrease was largely due to a substantial drop in inventories.

The Commerce Department said GDP decreased at an annual rate of 6.1 percent in the first quarter, better than in the previous quarter, but considerably worse than the 4.7 percent decline economists had anticipated.

The bigger than expected decrease came as a steep drop in inventories subtracted 2.8 percentage points from first quarter GDP.

Peter Boockvar, equity strategist at Miller Tabak, noted, The huge inventory drawdown will be reversed to some extent to the upside, thus helping economic activity.

Later in the day, trading is likely to be impacted by the Federal Reserve's announcement of the outcome of its two-day policy-setting meeting.

While the Fed is widely expected to leave interest rates unchanged, traders are likely to pay close attention to the accompanying statement, looking for indications of the Fed's future plans regarding the capital markets as well as its outlook for the economy.

In other news, President Obama and Vice President Biden welcomed Senator Arlen Specter to the Democratic Party on Wednesday, a day after the 5-term senator announced that he was leaving the Republican camp.

At a press conference held at the White House, Obama promised Specter his full support as the senator gears up to run for a 6th term as a member of his new party. The president praised Specter's courage and independence in switching parties.

The major averages have drifted down off their best levels of the day in recent trading, although they remain firmly positive. The Dow is up 147.27 at 8,164.22, the Nasdaq is up 40.00 at 1,713.81 and the S&P 500 is up 17.19 at 862.35.

Sector News

A vast majority of the major sectors are showing strong upward move on the day, reflecting broad based strength in the markets. Healthcare provider stocks continue to turn in some of the best performances in early afternoon trading.

Electronic storage stocks are also posting particularly strong gains, driving the Amex Disk Drive Index up 4.8 percent to a level that would mark its best closing level in over three and a half months. Hutchinson is helping to lead the sector higher, rising 17.7 percent.

With the price of oil showing a notable upward move, oil service stocks are also posting strong gains. The Philadelphia Oil Service Index is currently up 4.1 percent, as crude for June delivery is rising $0.71 to $50.63 a barrel.

Banking, airline, and networking stocks are also posting significant gains, with the Kbw Bank Index up 3.8 percent, while the Amex Airline Index and the Amex Networking Index are climbing 3.7 percent and 3.6 percent higher, respectively.

Noteworthy gains are also being shown by stocks in the steel, real estate, housing, and defense sectors.

Stocks In The News

Wyndham Worldwide (WYN) is posting a gain of 33.6 percent after releasing quarterly results that pleased investors and included strong guidance. With the advance, the stock has risen to its highest level in over six and a half months.

The company reported first quarter adjusted net income of $0.41 per share compared to the $0.35 per share expected by investors. Net revenues for the quarter declined to $901 million but beat the 838.91 million analysts were looking for.

Additionally, DreamWorks Animation (DWA) is up 23.6 percent after the company reported first quarter earnings that crushed analyst estimates. The company earned $0.71 per share, while analysts expected $0.45 per share.

Meanwhile, E*TRADE Financial (ETFC) is down 31.3 percent on the day after posting a first quarter loss of $0.41 per share, compared to a loss of $0.20 per share a year-ago. Analysts expected the company to report a loss of $0.40 per share.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region ended Wednesday's trading firmly in positive territory, as traders went bargain hunting. However, the Japanese market remained closed on account of Showa Day.

The major European markets also experienced substantial strength, with the U.K.'s FTSE 100 Index advancing 2.3 percent, while the French CAC 40 Index and the German DAX Index rose 2.2 percent and 2.1 percent, respectively.

In the bond market, treasuries have continued to show a lack of direction ahead of the announcement from the Federal Reserve. The yield on the benchmark ten-year note is currently up less than a basis point at 3.007 percent.

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