Stocks Extending Stay In Positive Territory Ahead Of Fed Announcement - U.S. Commentary

(RTTNews) - Stocks continue to show strength in early afternoon trading after a strong start to Wednesday's session, with trader reaction to some positive durable goods data contributing to the upward move. The major averages are all in positive territory, although they have backed away from their best levels of the day.

Early buying interest was sparked by a report from the Commerce Department showing that durable goods for May rose unexpectedly, dwarfing economist estimates.

However, a separate report from the Commerce Department showed that new home sales slipped in May, while economists had anticipated a moderate increase. Traders largely shrugged off the housing data, which was marked by notable revisions to the three previous months.

This afternoon, the results of the Federal Reserve's 2-day meeting are likely to drive the markets, as traders will digest near-term monetary policy and comments regarding the current economic climate. The Fed's announcement will be made at 2:15 p.m. ET.

In an interview with RTT News, Peter Boockvar, equity strategist at Miller Tabak, said on a scale of 1-10, his confidence level in the U.S. economy is at a 3, highlighting the "massive deleveraging that still needs to take place."

Boockvar also stated that he is concerned that "A lot of the government's steps are delaying the deleveraging and are kicking the can down the road."

The major averages are currently holding onto notable gains, with the tech-heavy Nasdaq turning in a particularly strong performance. The Dow is currently up 58.49 at 8,381.40, the Nasdaq is up 36.76 at 1,801.68 and the S&P 500 is up 11.88 at 906.98.

Sector News

Most of the major sectors continue to see considerable strength in afternoon trading, helping the major averages to extend their stay in positive territory.

Some of the day's best performances are being turned in by healthcare provider stocks, as reflected by the 4.6 percent climb in the Morgan Stanley Healthcare Provider Index. With the gain, the index is moving well off the one-month closing low it set in the previous session.

Gold and steel stocks are also posting strong gains, with the NYSE Arca Gold Bugs Index and the NYSE Arca Steel Index rising by 3 percent and 2.7 percent, respectively.

The gold index is moving further off of its worst closing level in nearly two months, helped by an increase in the price of the precious metal, which has climbed $12.80 to $937.10 an ounce. The steel index is climbing further off a one-month closing low set on Monday.

Transportation stocks also continue to move higher, with the Dow Jones Transportation Average advancing by 3.2 percent, taking back recent losses.

Stocks In The News

American Greeting (AM | Quote | Chart | News | PowerRating) is soaring in afternoon trading after the company reported first-quarter net income of $0.25 per share, beating out analyst estimates of $0.20 per share. The stock is up by 40.6 percent, reaching its best intraday price in six months.

Shares of Rite-Aid (RAD | Quote | Chart | News | PowerRating) are also moving to the upside are the drug store operator reported a first quarter loss of $0.11 per share, narrower than analyst estimates of $0.13 per share. Rite-Aid is up by 1.6 percent, continuing to move away from a three-week low set last Friday.

Meanwhile, Supervalu (SVU | Quote | Chart | News | PowerRating) is sliding following news that identical store sales and net earnings for the first quarter were impacted by a tougher than expected business environment. Shares of Supervalu are down by 12.3 percent, falling to their worst intraday level in just over two months. In Focus: Economic Data, Corporate & Earnings News

As mentioned above, a report from the Commerce Department showed that durable goods for May rose by 1.8 percent, matching a revised increase in April. The increase surprised economists, who had expected a decline of 0.9 percent.

Another notable increase in orders for transportation equipment contributed to the bigger than expected increase in durable goods orders. Orders for transportation equipment increased by 3.6 percent in May following a 6.2 percent increase in May.

Excluding the continued increase in orders for transportation equipment, durable goods orders still rose 1.1 percent in May compared to a 0.4 percent increase in April. Economists had expected ex-transportation orders to fall 0.5 percent.

In a separate report, the Commerce Department said that new home sales slipped by 0.6 percent to an annual rate of 342,000 in May from a revised April rate of 344,000. Economists had expected sales to jump 2.3 percent to 360,000 from the 352,000 originally reported for the previous month.

On the corporate front, troubled banking giant Citigroup (C) intends to raise workers' base salaries by as much as 50 percent this year to offset smaller annual bonuses, the New York Times reported, citing parties with direct knowledge of the plan.

Meanwhile, General Motors is reportedly planning to cut another 4,000 U.S. white-collar jobs by October 1, 600 more than it earlier announced, as part of an accelerated plan to shrink its work force.

In earnings news, Oracle (ORCL | Quote | Chart | News | PowerRating) said Tuesday after the markets closed that its fourth quarter profit fell about 7 percent from last year, as a stronger U.S. dollar ate into its sales. Nonetheless, the results beat analyst estimates, and shares of Oracle are up 9 percent on the news.

Contract electronics manufacturer Jabil Circuit (JBL | Quote | Chart | News | PowerRating) announced a third quarter net loss due to restructuring and impairment charges and lower revenues. The company's fourth quarter revenue forecast was also lower than analyst estimates. Nonetheless, the stock is currently up 4.1 percent.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region ended Wednesday's session on the upside. Japan's benchmark Nikkei 225 Index closed up 0.4 percent, while Hong Kong's Hang Seng Index jumped 2 percent.

The major European markets also closed notably higher, with the French CAC 40 Index and the German DAX Index finishing up by 2.2 percent and 2.7 percent, respectively, while the U.K.'s FTSE 100 Index jumped 1.2 percent.

In the bond markets, treasuries are showing modest weakness amid the buying interest seen in equities. Subsequently, the yield on the benchmark ten-year note is trading at 3.662 percent, an increase of 2.2 basis points on the day.

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