RTTNews - Stocks saw a notably strong outing on Friday, with early buying interested spearheaded by better than expected existing home sales data and relatively optimistic economic commentary from Federal Reserve Chairman Ben Bernanke. The major averages all rose by substantial margins on the day, extending their winning streak for the fourth straight session.

Today's rally was largely sparked a report from the National Association of Realtors showing that existing home sales increased by much more than expected in the month of July, with the headline figure rising for the fourth consecutive month.

The report showed that existing home sales rose 7.2 percent to an annual rate of 5.24 million units in July from a 4.89 million unit rate in June. Economists had been expecting a more modest increase to a 5.0 million unit rate.

NAR noted that the increase in sales was the largest monthly gain on record for the total existing-home sales series dating back to 1999. With the increase, existing home sales rose for the fourth consecutive month, the first four-month winning streak since June of 2004.

The markets also looked to remarks from Federal Reserve Chairman Ben Bernanke, who spoke about the recent financial crisis and the near-term economic outlook at the Kansas City Fed's annual conference in Jackson Hole, Wyoming.

The Fed chief said, Economic activity appears to be leveling out, both in the United States and abroad, adding that the prospects for a return to growth in the near term appear good.

However, Bernanke warned that the recovery might be sluggish at first, with unemployment declining only gradually from high levels.

On the earnings front, Gap Inc. (GPS), Ann Taylor Stores (ANN) and J. M. Smucker Company (SJM) reported earnings that beat Wall Street estimates on the bottom line.

The major averages were rangebound for much of the afternoon, although they reached new highs for the session in the final hour of trading. The Dow closed up by 155.91 points or 1.7 percent at 9,505.96, the Nasdaq climbed by 31.68 points or 1.6 percent to 2,020.90 and the S&P 500 rose by 18.76 points or 1.9 percent to 1,026.13.

With the four-day winning streak, the major averages all closed notably higher for the week, ending the session at multi-month closing highs. The Dow advanced by 2 percent, the Nasdaq moved up by 1.8 percent and the S&P 500 posted a gain of 2.2 percent.

Sector News

Housing stocks turned in some of the day's strongest performances, as reflected by the 3.5 percent gain posted by the Philadelphia Housing Sector Index. With the move, the index offset nearly all of its recent losses, boosted by today's existing home sales data.

The index was boosted by shares of M/I Homes (MHO), which surged up by 10.3 percent. The day's gain propelled the stock to its best finish in well over three months.

The resource sector also saw a strong outing, with oil, steel, natural gas and gold stocks all seeing considerable moves to the upside. The upward move by resource stocks came amid an increase in commodities prices. Notably, oil rose by $0.98 to close at $73.89 a barrel, a ten-month closing high.

Defense stocks also surged higher on the day, with the Philadelphia Defense Sector Index recording a gain of 3.2 percent on the session. The jump lifted the index to its best closing level in nearly eight months.

Transportation, banking, chemical, commercial real estate and retail stocks also moved higher, reflecting the day's broad based rally.

Dow Components

Caterpillar (CAT) and Merck (MRK) turned in two of the Dow's strongest performances, posting gains of 4 percent and 3.9 percent, respectively. With the gains, Caterpillar was able to nearly offset all of its recent losses, while Merck closed at its best price in ten and a half months.

The gain by Merck came as the FDA reaffirmed that the company's drug GARDASIL continues to be safe and effective, and its benefits continue to outweigh its risks. GARDASIL is for use in girls and women 9 to 26 years of age for the prevention of cervical, vulvar, and vaginal cancers.

Microsoft (MSFT) also saw a notable gain, rising by 3.1 percent on the session. The climb propelled shares of the software giant to their best finish in almost a month.

Disney (DIS), Home Depot (HD) and General Electric (GE) also saw considerable upside but remained stuck in ranges. Meanwhile, JP Morgan Chase (JPM), United Technologies (UTX) and Pfizer (PFE) all broke out of their recent trading ranges and finished at multi-month closing highs.

Wal-Mart (WMT) was the only Dow component to buck the upward trend, sliding by 0.7 percent on the day and extending its recent lackluster performance.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region saw a mixed performance on Friday. Japan's benchmark Nikkei 225 Index slipped by 1.4 percent, while China's Shanghai Composite rose by 1.7 percent.

Meanwhile, the major European markets all closed substantially higher, with the French CAC 40 Index and the German DAX Index rising by 3.2 percent and 2.9 percent, respectively, while the U.K.'s FTSE 100 Index finished up by 2 percent.

In the bond markets, the benchmark ten-year note plunged into negative territory amid reaction to the housing data and remained in the red for the remainder of the session. Subsequently, the yield on the note, which moves opposite of its price, jumped 12.1 basis points to finish at 3.556 percent.

Looking Ahead

Looking ahead to next week, bond traders will look to a slew of economic reports, with data on home prices, consumer confidence, gross domestic product and jobless claims among the reports due to be released.

Long-term bond auctions may also be in focus, with the Treasury scheduled to sell $42.0 billion in two-year notes, $39.0 billion in five-year notes and $28.0 billion in seven-year notes over the course of the week.

For comments and feedback: contact editorial@rttnews.com