Stocks Surging In The Mid-Morning On Largely Positive Economic Data - U.S. Commentary

(RTTNews) - After seeing a strong upward move at the open, stocks have continued higher over the course of morning trading on Wednesday, as traders react positively to the morning's influx of economic data. The major averages are all in positive territory by hefty margins, offsetting yesterday's losses.

While the Institute for Supply Management released a report showing a continued contraction in manufacturing activity in the month of June, the pace of contraction slowed from the previous month amid some encouraging signs for the sector.

The ISM said its index of activity in the manufacturing rose to 44.8 in June from 42.8 in May, with a reading below 50 indicating a contraction in the sector. The index came roughly in line with the expectations of economists, who forecast a reading of 44.6.

A separate report from the National Association of Realtors indicated that pending home sales increased for the fourth consecutive month in May, with favorable housing affordability and a first-time buyer tax credit contributing to the continued increase.

NAR said its pending home sales index rose 0.1 percent to 90.7 in May from an upwardly revised reading of 90.6 in April. Economists had been expecting the index to come in unchanged compared to the 90.3 originally reported for the previous month.

More economic data came from the U.S. Commerce Department, which revealed that construction spending fell 0.9 percent in May, following a revised 0.6 percent rise in the previous month. Economists had expected construction spending to fall by 0.6 percent following a rise of 0.8 percent that was originally reported for April.

Earlier, a report from private payroll processor Automatic Data Processing revealed that private sector employment fell by more than economists had been expecting in the month of June, although the report also showed a slowdown in the pace of job losses.

ADP said that non-farm private employment fell by 473,000 jobs in June following a revised decrease of 485,000 jobs in May. Economists had expected a decrease of 394,000 jobs compared to the loss of 532,000 jobs originally reported for the previous month.

In earnings news, Constellation Brands (STZ | Quote | Chart | News | PowerRating) reported first-quarter net income of $0.33, down from $0.34 in the same quarter a year earlier. On average, Wall Street analysts expected the company to earn $0.32 per share. The stock is moving higher in mid-morning trading.

General Mills (GIS | Quote | Chart | News | PowerRating) reported adjusted fourth-quarter net income of $0.86, up 18 percent from $0.73 in the same period last year. Analysts expected the firm to report earnings of $0.80 per share. Shares of the consumer foods manufacturer are also seeing some strength in mid-morning dealing.

The major averages have moved roughly sideways in recent trading, hovering near their best levels of the day. The Dow is currently up 125.23 at 8,572.23, the Nasdaq is up 25.68 at 1,860.72 and the S&P 500 is up 11.58 at 930.90.

Sector News

Following a weak outing in the previous session, resource stocks have moved back to the upside, with significant strength visible among gold, steel and oil stocks. The NYSE Arca Gold Bugs Index and the NYSE Arca Steel Index are up by 4.2 percent and 3.0 percent, respectively, while the Philadelphia Oil Service Index is up 1.8 percent.

The gains by resource stocks come amid an increase in most major commodities prices, with the standout gains by gold prices coming as the price of the precious metal is up more than $10 an ounce.

Shares of Quanex Building Products (NX | Quote | Chart | News | PowerRating) are helping to boost the steel sector, climbing by 7 percent. The day's gain is continuing to propel the stock away from the one-month closing low set in late June.

Further strength is visible among transportation stocks, with the Dow Jones Transportation Average up by 3 percent in mid-morning trading. Despite the day's strong upward move, the index continues to move within a two month trading range.

Networking, healthcare provider, electronic storage and housing stocks are also posting notable gains, reflecting the broad advance in the markets on the day.

Stocks Driven By Analyst Comments

Marvel Entertainment (MVL | Quote | Chart | News | PowerRating) is climbing by a notable margin in mid-morning trading after being upgraded by JP Morgan Chase to Overweight from Neutral. The broker cited the firm's continued steady revenue from its character licensing as a reason for the upgrade. The stock is up by 5.1 percent after reaching its best intra-day price in over nine months earlier in the day. Shares of Werner Enterprises (WERN | Quote | Chart | News | PowerRating) are also on the rise following an upgrade by JP Morgan Chase, which also raised its rating on the stock to Overweight from Neutral. Shares of the transportation firm are up by 4.6 percent, taking back some recent losses and creeping back towards their best level of the year set in early June.

On the other hand, Check Point Software (CHKP | Quote | Chart | News | PowerRating) is falling after being downgraded by JP Morgan Chase from Overweight to Neutral. The downgrade came amid the difficult economic conditions in Europe. Despite the stock sliding by 1 percent, it remains stuck in roughly a two month trading range.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region ended Wednesday's session on a mixed note. Japan's benchmark Nikkei 225 Index closed down by 0.2 percent, while South Korea's KOSPI Index closed up by 1.6 percent. Trading in Hong Kong was closed for the day.

Meanwhile, the major European markets have moved firmly to the upside, with the German DAX Index and French CAC 40 Index up by 2.1 percent and 2.7 percent, respectively. The U.K.'s FTSE 100 Index is also moving higher, rising 2.1 percent.

In the bond markets, treasuries continue to see weakness amid the day's rally on Wall Street. Subsequently, the yield on the benchmark ten-year note is at 3.591 percent, seeing a jump of 6.8 basis points on the day.

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