RTTNews - Stocks saw a strong outing on Wednesday, as trader expectations were largely confirmed by the Federal Reserve. The major averages all closed in positive territory by substantial margins, posting their first positive session of the week after the previous two days were slowed by profit taking.

The Federal Open Market Committee, the policy-making arm of the Federal Reserve, announced Wednesday that it was maintaining the target range for its benchmark federal funds rate at zero to 0.25 percent.

The Fed also repeated its belief that low rates will persist for what it calls an extended period. The central bank added that economic activity is leveling out.

The central bank also said it will gradually slow the pace of treasury purchases and expects that the full amount of $300 billion will be purchased by the end of October.

Going into the meeting, the Fed was universally expected to leave rates unchanged, but there was some speculation that the central bank could announce the end of its program to buy treasury bonds, a move it had undertaken to further stimulate the economy.

Earlier, traders largely shrugged off a report from the Commerce Department showing that the U.S. trade deficit widened in the month of June compared to the previous month. The deficit for the month still came in narrower than economists had been anticipating.

The report revealed that the trade deficit widened to $27.0 billion in June from $26.0 billion in May, with imports increasing at a faster pace than exports. Economists had been expecting a somewhat more significant increase in the size of the deficit to $28.7 billion.

The major averages saw a late session rally stall but still finished with notable gains. The Dow jumped by 120.16 points or 1.3 percent to 9,361.61, the Nasdaq climbed by 28.99 points or 1.5 percent to 1,998.72 and the S&P 500 rose by 11.46 points or 1.2 percent to 1,005.81.

Sector News

While housing and airline stocks took back the majority of the losses posted earlier this week, networking stocks more than offset this week's pullback. The NYSE Arca Networking Index rose by 4 percent on the session, climbing to its best closing level in nearly eleven months.

The index was led higher by shares of ADC Telecommunications Inc. (ADCT), which surged up by 28.8 percent, reaching its best closing price in ten months. The move came after the company provided a revised third quarter earnings outlook that was above analyst estimates. The firm expects earnings of $0.11 to $0.16 per share compared to forecasts of $0.08 per share.

Notable strength was also visible among defense stocks, with the Philadelphia Defense Sector climbing by 2.4 percent on the day. With the gain, the index finished the session at a seven-month closing high.

Software, steel, biotechnology, telecommunications were also among the broad variety of stocks rebounding from the pullback earlier in the week, with the NYSE Arca Software Index closing at a ten-month high.

Dow Components

United Technologies (UTX) turned in the strongest performance in the blue chip index, posting a gain of 4.3 percent on the day. The stock was able to build on its recent gains, closing at its best level in ten months.

Travelers (TRV) also saw a strong session, rising by 3.3 percent on the day. With the gain, the stock offset most of the losses posted in the previous two sessions.

Caterpillar (CAT), JP Morgan Chase (JPM), Boeing (BA), and a number of other Dow components also regained some ground, rising by at least 2 percent. Despite the strong upward move, the stocks were unable to break out of their recent trading ranges.

Meanwhile, Hewlett Packard (HPQ) posted a slightly more modest gain of 1.8 percent. With the advance, the stock was able to close at its best level in just over ten months.

Shares of Verizon (VZ), Alcoa (AA), Microsoft (MSFT), Wal-Mart and others also rose, while chemical giant DuPont (DD) and food stalwart Coca-Cola (KO) were the only two laggards in the blue chip index.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region finished markedly lower on Wednesday. Japan's benchmark Nikkei 225 Index dropped by 1.4 percent, while Hong Kong's Hang Seng Index plunged by 3 percent.

Meanwhile, the major European markets closed considerably higher, with the French CAC 40 Index and the German DAX Index rising by 1.5 percent and 1.2 percent, respectively, while the U.K.'s FTSE 100 Index posted a gain of 1 percent.

In the bond markets, treasuries saw little change following a volatile session. Subsequently the yield on the benchmark ten-year note finished at 3.701 percent, posting a gain of less than a basis point on the day.

Looking Ahead

On Thursday, trading sentiment is likely to be guided by two key reports, with data on retail sales and weekly jobless claims set to be released ahead of the opening bell on Wall Street.

The Commerce Department's report on July retail sales is expected to show a 0.7 percent increase in sales compared to a 0.6 percent climb in June. In a separate report, the Labor Department will reveal jobless claims figures for the week ended August 8th, with economists forecasting initial claims at 545,000 after the 550,000 reported last week. Both of the reports will be released at 8:30 .m. ET.

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