U.S. Stocks Extend Rally On Upbeat Earnings News

(RTTNews) - Stocks moved sharply higher over the course of the trading day on Tuesday, extending the strong upward move seen over the past several sessions. With the continued advance, the major averages all reached their best closing levels in over a year.

The major averages finished the session just off their highs of the day. The Dow jumped 366.58 points or 1.1 percent to 34,951.93, the Nasdaq advanced 108.69 points or 0.8 percent to 14,353.64 and the S&P 500 climbed 32.19 points or 0.7 percent to 4,554.98.

The rally on Wall Street partly reflected a positive reaction to earnings news from big-name companies like Bank of America (BAC) and Morgan Stanley (MS).

Shares of Bank of America and Morgan Stanley soared by 4.4 percent and 6.5 percent, respectively, after both financial giants reported second quarter results that exceeded analyst estimates on both the top and bottom lines.

Bank of New York Mellon (BK) and PNC Financial Services (PNC) also posted strong gains after reporting their quarterly results.

"We are done with the majority of the big banks and the overall takeaway is that they did ok despite a weakening economy and all the turmoil that stemmed from the regional banking crisis last quarter," said Edward Moya, senior market analyst at OANDA.

He added, "Wall Street knows this earnings season will have everyone calling this a challenging market environment, but optimism might remain that a resilient U.S. economy should translate into decent spending despite all the headwinds. "

Traders also reacted positively to the release of separate reports showing a smaller than expected increase in retail sales and an unexpected decrease in industrial production.

While the reports have led to some concerns about the strength of the economy, the data has added to recent optimism about the Federal Reserve nearing the end of its interest rate hiking cycle.

The Commerce Department said retail sales edged up by 0.2 percent in June after climbing by an upwardly revised 0.5 percent in May.

Economists had expected retail sales to advance by 0.5 percent compared to the 0.3 percent growth originally reported for the previous month.

Excluding a modest increase in sales by motor vehicles and parts dealers, retail sales still rose by 0.2 percent in June after rising by an upwardly revised 0.3 percent in May.

Economists had expected ex-auto sales to increase by 0.3 percent compared to the 0.1 percent uptick originally reported for the previous month.

Meanwhile, the Fed said industrial production slid by 0.5 percent in June, matching the downwardly revised decrease in May.

Economists had expected production to come in unchanged compared to the 0.2 percent dip originally reported for the previous month.

Sector News

Financial stocks saw substantial strength following the upbeat earnings news, with the KBW Bank Index and the NYSE Arca Broker/Dealer Index spiking by 3.0 percent and 2.8 percent, respectively.

Considerable strength also emerged among software stocks, as reflected by the 2.6 percent surge by the Dow Jones U.S. Software Index. With the jump, the index reached its best closing level in over a year.

Airline stocks also showed a significant move to the upside over the course of the session, driving the NYSE Arca Airline Index up by 2.2 percent.

Energy, gold and steel stocks also saw notable strength on the day, while some weakness was visible among interest rate-sensitive utilities and commercial real estate stocks.

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 rose by 0.3 percent, while Hong Kong's Hang Seng Index plunged by 2.1 percent.

Meanwhile, the major European markets all moved to the upside over the course of the session. While the U.K.'s FTSE 100 Index advanced by 0.6 percent, the French CAC 40 Index and the German DAX Index both climbed by 0.4 percent.

In the bond market, treasuries ended the day roughly flat after failing to sustain an early upward move. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, edged down by less than a basis point to 3.789 percent after hitting a low of 3.738 percent.

Looking Ahead

Earnings news may continue to attract attention on Wednesday, with Goldman Sachs (GS), Halliburton (HAL) and M&T Bank (MTB) among the companies due to report their quarterly results before the start of trading.