Stocks Close Mostly Higher Ahead Of Fed Announcement - U.S. Commentary

(RTTNews) - Stocks moved mostly higher over the course of the trading day on Tuesday, extending the upward trend seen over the past few weeks. With the gains on the day, the Dow and the S&P 500 both reached new record closing highs.

The major averages moved to the upside going into the close, ending the day firmly in positive territory. The Dow jumped 111.42 points or 0.7 percent to 15,680.35, the Nasdaq rose 12.21 points or 0.3 percent to 3,952.34 and the S&P 500 climbed 9.84 points or 0.6 percent to 1,771.95.

The strength that emerged on Wall Street seemed to reflect optimism about the outcome of the Federal Reserve's two-day policy meeting that began today.

The Fed is widely expected to maintain its asset purchase program at the current pace when it announces its decision Wednesday afternoon, although traders will be looking for any indications regarding future tapering.

A report showing an unexpected decrease in U.S. retail sales in the month of September may have helped reinforce expectations that the Fed will extend its stimulus program.

The report said retail sales edged down by 0.1 percent in September following a 0.2 percent increase in August. Economists had expected retail sales to come in unchanged.

Excluding a steep drop in auto sales, however, retail sales rose by 0.4 percent in September compared to a 0.1 percent uptick in the previous month.

Separately, the Labor Department released a report showing a modest decrease in producer prices in September, with a notable drop in food prices offsetting an increase in energy prices.

The Labor Department said its producer price index edged down by 0.1 percent in September following a 0.3 percent increase in August. The drop surprised economists, who had expected prices to increase by about 0.2 percent.

Excluding food and energy prices, the core producer price index inched up by 0.1 percent in September after coming in unchanged in the previous month. The modest increase matched economist estimates.

Meanwhile, the Conference Board released a report showing a substantial deterioration in consumer confidence in the month of October, with the government shutdown weighing on expectations.

The Conference Board said its consumer confidence index tumbled to 71.2 in October from an upwardly revised 80.2 in September. Economists had been expecting the index to fall to 75.0 from the 79.7 originally reported for the previous month.

Despite the upward move by the broader markets, shares of Apple (AAPL) fell by 2.5 percent after the tech giant reported better than expected fourth quarter results but provided disappointing gross margin guidance for the current quarter.

Sector News

Semiconductor stocks showed a significant move to the upside over the course of the trading day, driving the Philadelphia Semiconductor Index up by 1.5 percent. The gain lifted the index within striking distance of the six-year highs set last week.

Micron (MU) helped to lead the semiconductor sector higher, jumping by 4.7 percent, while Analog Devices (ADI) and Teradyne (TER) also posted strong gains.

Considerable strength also emerged among telecom stocks, as reflected by the 1.3 percent gain posted by the NYSE Arca Telecom Index. With the gain, the index reached its best closing level in over a month.

Tobacco, networking, and internet stocks also saw notable strength on the day, moving higher along with most of the other major sectors.

Meanwhile, gold stocks came under significant selling pressure, dragging the NYSE Arca Gold Bugs Index down by 2.9 percent. The weakness in the sector came as gold for December delivery fell $6.70 to $1,345.50 an ounce.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Tuesday. Japan's Nikkei 225 Index fell by 0.5 percent, while Hong Kong's Hang Seng Index crept up by 0.2 percent.

Meanwhile, the major European markets all moved to the upside on the day. While the German DAX Index rose by 0.5 percent, the French CAC 40 Index and the U.K.'s FTSE 100 Index advanced by 0.6 percent and 0.7 percent, respectively.

In the bond market, treasuries fluctuated over the course of the session before ending the day slightly higher. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, edged down by less than a basis point to 2.507 percent.

Looking Ahead

Trading activity on Wednesday may be somewhat subdued in the lead up to the Fed announcement, which is not due until late in the trading day.

Ahead of the announcement from the Fed, traders are likely to keep an eye on reports on private sector employment and consumer price inflation.

On the earnings front, Comcast (CMCSA), General Motors (GM), and Sprint (S) are among the companies due to report their quarterly results before the start of trading on Wednesday.