Stocks are seeing continued strength in early afternoon trading on Monday, with the major averages hovering firmly in positive territory. Nonetheless, buying interest has waned somewhat from earlier in the session.
The strong upward move seen in morning trading came as traders reacted to some better than expected economic data, including a report from the National Association of Realtors showing a surprise jump in pending home sales.
The report showed that NAR's pending home sales index rose 3.2 percent in March following a revised 2.0 percent increase in February. Economists had expected the index to come in unchanged following the 2.1 percent increase originally reported for the previous month.
Peter Boockvar, equity strategist at Miller Tabak, noted that a decrease in the average 30-year mortgage rate was likely a key catalyst for the improvement in pending home sales along with the lower prices brought about by foreclosures.
One thing to watch looking out the next few months is the end of the foreclosure moratorium at many banks and how much more supply that creates, Boockvar said.
Separately, the Commerce Department released a report showing an unexpected increase in construction spending, which rose 0.3 percent in March following a 1.0 percent decrease in February. Economists had expected spending to fall by about 1.6 percent.
In other news, President Barack Obama addressed his administration's efforts to close tax loopholes Monday, announcing an additional 800 full-time Internal Revenue Service employees as part of an effort to crack down on corporations who avoid paying full taxes.
Joined by Treasury Secretary Tim Geithner, Obama pledged that his administration is working to reform the tax system and crack down on illegal overseas tax evasion.
The president said his administration's efforts to crack down on offshore tax evasion, which he called the largest tax scam in the world, would save American taxpayers $210 billion over the next ten years.
On the corporate front, shares of Pepsi Bottling Group (PBG) are seeing modest weakness after the company said its Board of Directors has rejected a proposal by PepsiCo (PEP) to buy all outstanding shares of common stock of PBG not owned by PepsiCo as grossly inadequate.
While the major averages have pulled back off their best levels of the day in recent trading, they are holding onto strong gains. The Dow is currently up 137.87 at 8,350.28, the Nasdaq is up 23.13 at 1,742.33 and the S&P 500 is up 15.60 at 893.12.
Transportation stocks are posting particularly strong gains in early afternoon trading, resulting in a 5.3 percent gain by the Dow Jones Transportation Average. With the gain, the average has risen to its best intraday level in well over three months.
Within the transportation sector, airline stocks are seeing considerable strength, as reflected by the 5.7 percent gain being shown by the Amex Airline Index. Continental (CAL) is leading the way higher, rising 15.5 percent after reporting a modest 3.4 percent drop in April traffic.
Significant strength also remains visible among banking stocks, as traders shrug off concerns that banks may need to raise additional capital. The S&P Banks Index is currently up 6.8 percent, moving towards the high end of a recent trading range.
Steel stocks are also holding onto standout gains, pushing the Amex Steel Index up 5.2 percent to a six-month intraday high. Better than expected economic data has generated some optimism about the outlook for steel demand.
While most of the other major sectors also continue to see considerable strength, gold, housing, and semiconductor stocks are posting notable gains. The gains by gold stocks come as gold for June delivery is currently up $15.30 at $903.50 an ounce.
On the other hand, some weakness has emerged in the health insurance sector, with the Morgan Stanley Healthcare Payor Index currently down 1 percent. Cigna (CI) is turning in one of the sector's worst performances, falling 4.8 percent.
Stocks In The News
Among individual stocks, shares of Estée Lauder (EL) have moved sharply higher, with the cosmetics company currently up 12.2 percent. With the gain, Estée Lauder has risen to its best intraday level in nearly six months.
The gain by Estée Lauder comes after the company reported third quarter earnings that fell sharply year-over-year but came in better than analysts had expected. At the same time, the company tightened its full year earnings guidance to $1.32 to $1.44 per share.
Shares of Tyson Foods (TSN) have also shown a strong upward move after the meat producer reported a narrower than expected second quarter loss. Tyson is currently up 8.1 percent after reaching a six-month intraday high.
At the other end of the spectrum, shares of E.W. Scripps (SSP) are currently down 11.3 percent after the media company reported a wider than expected first quarter loss. Scripps ended the previous session at a nearly four-month closing high.
In overseas trading, significant strength was visible in the stock markets across the Asia-Pacific region, although the Japanese market remained closed for a national holiday. The strength in the region was partly due to the release of some better than expected Chinese economic data.
While the market in London remained closed for a holiday, the other major European markets also turned in strong performances. The French CAC 40 Index and the German DAX Index closed up 2.5 percent and 2.8 percent, respectively.
In the bond market, treasuries have shown a lack of direction over the course of the trading day, bouncing back and forth across the unchanged line. The yield on the benchmark ten-year note is currently down less than a basis point at 3.165 percent.
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