U.S. Stocks Close Higher As Traders Shrug Off Interest Rate Concerns

(RTTNews) - After an initial move to the downside, stocks regained ground over the course of the trading session on Wednesday. The major averages climbed well off their worst levels of the day and eventually closed in positive territory.

The major averages all finished the day higher, with the tech-heavy Nasdaq leading the advance. While the Nasdaq jumped 110.45 points or 0.9 percent to 12,070.59, the S&P 500 rose 11.47 points or 0.3 percent to 4,147.60 and the Dow inched up 38.78 points or 0.1 percent to 34,128.05.

The early weakness on Wall Street reflected ongoing concerns about the outlook for interest rates following the release of upbeat retail sales data.

Before the start of trading, the Commerce Department released a report showing a substantial increase in U.S. retail sales in the month of January.

The report said retail sales spiked by 3.0 percent in January after tumbling by 1.1 percent in December. Economists had expected retail sales to jump by 1.8 percent.

Excluding a surge in sales by motor vehicle and parts dealers, retail sales still shot up by 2.3 percent in January after falling by a revised 0.9 percent in December.

Ex-auto sales were expected to increase by 0.8 percent compared to the 1.1 percent slump originally reported for the previous month.

The sharp increase in retail sales has led to concerns the Federal Reserve will be encouraged to continue aggressively raising interest rates in an effort to combat inflation.

"The data-dependent Fed is seeing its case for more ongoing rate increases get bolstered after both inflation accelerated and as retail sales rebound sharply in January," said Edward Moya, senior market analyst at OANDA.

The concerns about rates may have been partly offset by a separate report from the Federal Reserve showing U.S. industrial production was unexpectedly unchanged in month of January.

The report said industrial production was unchanged in January after slumping by a revised 1.0 percent in December.

Economists had expected industrial production to climb by 0.5 percent compared to the 0.7 percent decrease originally reported for the previous month.

Sector News

Tobacco stocks showed a strong move to the upside on the day, driving the NYSE Arca Tobacco Index up by 1.2 percent.

Considerable strength also emerged among networking stocks, as reflected by the 1.1 percent gain posted by the NYSE Arca Networking Index.

On the other hand, substantial weakness remained visible among gold stocks, dragging the NYSE Arca Gold Bugs Index down by 2.5 percent.

The sell-off by gold stocks came amid a steep drop by the price of the precious metal, with gold for April delivery tumbling $20.10 to $1,845.30 an ounce.

Energy stocks also saw notable weakness as the price of crude oil climbed off its worst levels of the day but still closed in negative territory.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Wednesday. Japan's Nikkei 225 Index fell by 0.4 percent, while Hong Kong's Hang Seng Index tumbled by 1.4 percent.

Meanwhile, the major European markets moved to the upside on the day. While the French CAC 40 Index jumped by 1.2 percent, the German DAX Index advanced by 0.8 percent and the U.K.'s FTSE 100 Index climbed by 0.6 percent.

In the bond market, treasuries extended a recent downward trend amid concerns about the outlook for interest rates. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, climbed 4.8 basis points to 3.809 percent.

Looking Ahead

Trading on Thursday may be impacted by reaction to another batch of U.S. economic data, including reports on jobless claims, producer prices and housing starts.