News Column

Stocks Holding On To Modest Gains After Early Upward Move - US Commentary

August 19, 2014

WASHINGTON (Alliance News) - With traders reacting positively to a pair of key US economic reports, stocks have moved mostly higher during trading on Tuesday. The gains are extending a recent upward trend by the markets, with the tech-heavy Nasdaq reaching a new fourteen-year intraday high.

The major averages have moved roughly sideways in recent trading, hovering in positive territory. The Dow is up 66.97 points or 0.4% at 16,905.71, the Nasdaq is up 8.99 point or 0.2% at 4,517.30 and the S&P 500 is up 7.26 points or 0.4% at 1,979.00.

The continued strength on Wall Street comes following the release of two closely watched reports on consumer price inflation and new residential construction.

Before the start of trading, the Labor Department released a report showing only modest consumer price growth in the month of July, with higher prices for shelter and food offset by decreases in prices for energy and airline fares.

The Labor Department said its consumer price index ticked up by 0.1% in July after rising by 0.3% in June. The modest increase by the index matched economist estimates.

Excluding food and energy prices, the core consumer price index also inched up by 0.1% in July, matching the increase seen in the previous month. Economists had been expecting the core index to edge up by 0.2%.

Combined with last week's tame producer price inflation data, the report has further offset concerns about the outlook for interest rates.

Paul Dales, Senior US Economist at Capital Economics, said, "The recent softening in US core consumer prices eases some of the pressure on the Fed to start considering rate hikes, although in our view only temporarily."

Meanwhile, the Commerce Department released a separate report showing a substantial rebound by US housing starts in the month of July.

The report said housing starts jumped 15.7% to an annual rate of 1.093 million in July after falling 4% to a revised 945,000 in June.

With the substantial increase, housing starts rose to their highest level reaching a rate of 1.105 million in November of last year.

In corporate news, shares of Home Depot (HD) have moved sharply higher on the day after the home improvement retailer reported better than expected second quarter results and raised its full-year earnings guidance.

Sector News

Housing stocks have shown a significant move to the upside on the heels of the upbeat housing starts data. The Philadelphia Housing Sector Index has surged up by 1.6%, reaching its best intraday level in almost a month.

Ryland Group (RYL) and Lennar (LEN) are turning in two of the housing sector's best performances, advancing by 3.1% and 2.9%, respectively.

Considerable strength has also emerged among retail sales, as reflected by the 1.4% gain being posted by the Dow Jones Retail Index. Aeropostale (ARO) is posting a standout gain after rehiring Julian Geiger as CEO.

Natural gas, oil service, and utilities stocks are also seeing notable strength on the day, while most of the other major sectors are showing more modest upward moves.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved higher on Tuesday following the positive lead from Wall Street overnight. Japan'sNikkei 225 Index advanced by 0.8%, while Hong Kong'sHang Seng Index climbed by 0.7%.

The major European markets also moved to the upside on the day. While the German DAX Index jumped by 1%, the UK'sFTSE 100 Index and the French CAC 40 Index both rose by 0.6%.

In the bond market, treasuries have turned lower over the course of the trading session after seeing early strength. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 1.1 basis points at 2.398%.

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Source: Alliance News

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