After moving sharply higher in early trading on Friday, stocks continue to see some strength in the early afternoon. While the major averages pulled back sharply after failing to sustain their initial upward moves, they have moved back to the upside since then.
Banking stocks are helping to lead the way higher, as traders react positively to the release of the official results of the government's stress tests of the nation's 19 largest financial institutions. The results were released after the close of trading on Thursday.
U.S. bank regulators said about half of the country's biggest financial institutions need to improve their capital positions in order to ensure that they can weather a further downturn in the economy.
The results of the stress tests showed that 10 of the 19 banks tested need to raise a total of $74.6 billion. The banks involved in the exercise account for two-thirds of the assets and more than half of the loans in the U.S. banking system.
Regulators determined that Bank of America (BAC), Wells Fargo (WFC), and Citigroup (C) are among the companies that need to improve their capital position, while Goldman Sachs (GS) and JP Morgan (JPM) are among those that don't need additional funding.
The markets are also benefiting from a positive reaction to the release of a Labor Department report showing a much smaller than expected decrease in employment in the month of April.
The report showed that non-farm payroll employment fell by 539,000 jobs in April following a revised decrease of 699,000 jobs in March. The decrease in employment marked the smallest drop in jobs since October of 2008.
While the decrease was smaller than the loss of 600,000 jobs expected by economists, upward revisions to the number of job losses in February and March offset some of the optimism about the labor market.
The Labor Department also said that the unemployment rate rose to 8.9 percent in April from 8.5 percent in March. The increase, which lifted the unemployment rate to a new 25-year high, came in line with economist estimates.
However, Chris Low, the chief economist at FTN Financial, noted, Even the four-tenths rise in the unemployment rate was less than the five tenths rise in March. And so the discussion shifts from 'recession or recovery' to 'strong recovery, or weak?'
In recent trading, the Dow and the S&P 500 have moved back near their best levels of the day, while the Nasdaq has climbed more firmly into positive territory. The Dow is up 120.91 at 8,530.76, the Nasdaq is up 10.68 at 1,726.92 and the S&P 500 is up 15.32 at 922.71.
While banking stocks continue to post particularly strong gains following the release of the stress test results, oil stocks are also posting significant gains. The Amex Oil Index is currently up 4 percent, rising to its best intraday level in almost three months.
A notable increase by the price of crude oil is contributing to the gains by oil stocks, with crude for June delivery currently up $1.16 at $57.87 a barrel. The price of oil rose as high as $58.45 earlier in the day, testing the six-month high it set in the previous session.
Similarly, natural gas stocks have shown a strong upward move over the course of the session, moving higher along with the price of gas. With the price of natural gas increasing by 2.4 percent, the Amex Natural Gas Index is currently up 5.2 percent.
A variety of other sectors are also turning in strong performances in early afternoon trading, with considerable strength visible among real estate, housing, and brokerage stocks.
On the other hand, significant weakness remains visible among semiconductor stocks, as reflected by the 1.9 percent loss currently being shown by the Philadelphia Semiconductor Index. However, the index has moved well off its low for the session.
Within the semiconductor sector, graphics chip maker Nvidia (NVDA) is posting a notable loss, down 11.3 percent after hitting its worst intraday level in well over a month. The loss by Nvidia comes after the company reported a first quarter loss versus a year-ago profit.
Stocks In The News
After closing lower in the two previous sessions, shares of VeriSign (VRSN) have shown a strong move back to the upside, with the Internet infrastructure services provider currently up 13.5 percent. With the gain, VeriSign has risen to its best intraday level in over six months.
The gain by VeriSign comes after the company reported a better than expected first quarter profit compared to a year-ago loss. The stronger than expected earnings came amid an increase in revenues as well as a decrease in costs.
Shares of Activision Blizzard (ATVI) have also moved sharply higher after video game maker reported first quarter earnings that exceeded analyst estimates. Activision Blizzard is currently up 8.6 percent are reaching a five-month intraday high.
Meanwhile, shares of Allstate (ALL) are currently down 11.7 percent after the insurer reported a first quarter loss compared to a year-ago profit. Excluding items, Allstate still reported earnings that came in well below analyst estimates.
In overseas trading, modest strength was visible in most of the stock markets across the Asia-Pacific region, with Japan's benchmark Nikkei 225 Index adding to the substantial gain it posted in the previous session to reach a six-month high.
European stocks also turned in strong performances, although they ended the session off their best levels of the day. The U.K.'s FTSE 100 Index rose 1.4 percent, while the French CAC 40 Index and the German DAX Index closed up 1.9 percent and 2.3 percent, respectively.
In the bond market, treasuries have moved back the downside in recent trading, with the benchmark ten-year note slipping modestly below the unchanged line. Subsequently, the yield on the ten-year is currently up less than a basis point at 3.299 percent.
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