RTTNews - Stocks were able to recover from early weakness and finished notably higher on Wednesday, largely driven by a report indicating a jump in oil demand. The major averages all closed in positive territory by solid margins, further offsetting Monday's losses.

With no significant news on the economic front, the day's crude oil inventories report received extra attention. Inventories unexpectedly fell in the week ended August 14th, according to data released this morning by the Energy Information Administration.

Oil prices surged above $70 a barrel after the report was made public, resulting in significant strength among oil-related stocks, which largely spearheaded today's rally. Crude for September delivery eventually closed up $3.23 at $72.42 a barrel.

The EIA said crude oil inventories decreased by 8.4 million barrels, while analysts expected to see an increase of about 1.1 million barrels for the week. At 343.6 million barrels, however, crude oil inventories remain above the upper boundary of the average range for this time of year.

Earlier, traders reacted to the latest set of corporate quarterly results, with Hewlett-Packard (HPQ) reporting third quarter earnings of $0.91 per share after the closing bell Tuesday, beating the consensus estimate of $0.90 per share. The company expects to report fourth quarter earnings of $1.12 per share compared to the forecast of $1.07 per share.

Deere & Co. (DE) reported third-quarter net income of $0.99 per share, compared with $1.32 per share in the same period last year. The results topped Wall Street estimates of $0.57 per share.

Looking forward, Deere said it expects full year net income of $1.1 billion despite expectations for the largest single-year sales decline in at least 50 years.

BJ's Wholesale Club (BJ) reported second quarter net income of $0.64 per share, compared to $0.61 per share in the prior year quarter. Analysts had expected the firm to earn $0.62 per share.

In other news, Ellen Hughes-Cromwick, chief economist of Ford Motor Co. (F), was quoted as saying that economic indicators in the U.S are showing that a recovery is already underway and that auto sales seem to be stabilizing. Hughes-Cromwick also predicted that Ford would see an improvement in sales in 2010.

The major averages saw choppy movement in late-session dealing, finishing near their best levels of the day. The Dow closed up by 61.22 points or 0.7 percent at 9,279.16, the Nasdaq climbed by 13.32 points or 0.7 percent to 1,969.24 and the S&P 500 rose by 6.79 points or 0.7 percent to 996.46.

Sector News

As mentioned above, energy stocks turned in strong performances, with oil and oil service posting notable gains amid the spike in the price of oil. The NYSE Arca Oil Service Index rose by 1.7 percent, but it remained stuck in a recent range along with the other resource indices.

Biotechnology stocks also advanced, with the NYSE Arca Biotechnology Index posting gain of 2.2 percent on the day. InterMune Inc. (ITMN) helped to lead the sector higher, ending the session up 4.2 percent. With the gain, InterMune bounced off of the one-month closing low set on Tuesday.

While pharmaceutical, chemical and gold stocks also moved higher on the day, some weakness was visible among airline and commercial real estate stocks. The NYSE Arca Airline Index and the Morgan Stanley REIT Index fell by 1.4 percent and 1 percent, respectively, moving further off the multi-month closing highs set earlier this month.

The weakness among real estate stocks came after the National Association of Realtors reported that its Commercial Leading Indicator for Brokerage Activity fell by 1.3 percent to 101.5 in the second quarter, the lowest reading since the first quarter of 1994.

Dow Components

Merck (MRK) led the Dow higher, with the drug giant posting a gain of 2.5 percent and reaching a ten-month closing high. The advance came following news that the U.S. District Court of New Jersey ruled in favor of Merck in a patent infringement suit against Teva Pharmaceuticals (TEVA).

Kraft Foods (KFT) also rose by 2.5 percent on the session, moving further away from the nearly one-month closing low set on Monday.

Pfizer (PFE) and Exxon Mobil (XOM) also moved notably higher on the day, advancing by 2.4 percent and 2.3 percent, respectively. Pfizer closed at a three-week high, while the upward move by Exxon lifted the stock well off the one-month closing low set on Tuesday.

While DuPont (DD) and Chevron (CVX) saw comparable gains on the day, Alcoa (AA) slid by a notable margin, posting a loss of 3.4 percent. The loss came after Goldman Sachs lowered its rating on the stock to Neutral from its Americas Buy List, citing valuation and Alcoa's historically high inventories.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region finished notably lower on Wednesday. Japan's benchmark Nikkei 225 Index fell by 0.8 percent, while Hong Kong's Hang Seng Index declined by 1.7 percent.

Meanwhile, the major European markets ended the day little changed, with the French CAC 40 Index and the U.K.'s FTSE 100 Index finishing just below the unchanged mark, while the German DAX Index fell by 0.4 percent.

In the bond markets, treasuries saw notable gains but were limited by the advance in stocks. Subsequently, the yield on the benchmark ten-year note closed at 3.463 percent, posting a loss of 6.3 basis points on the day.

Looking Ahead

Traders will look to a slew of economic reports on Thursday, with jobless claims data, the results of the Philly Fed Survey and a compilation of leading economic indicators all scheduled to be released.

The jobs report from the Labor Department is likely to garner the most attention, as the labor market has continued to concern economists. Economists expect jobless claims for the week ended August 15th to edge down to 553,000 from 558,000 in the previous week. The report is set to be released at 8:30 a.m. ET.

The markets will also focus on quarterly results from NetApp (NTAP), Limited Brands (LTD), and Harman International (HAR), among others.

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