Stocks showed a substantial upward move over the course of the trading day on Tuesday, adding to the modest gains posted in the previous session. The markets benefited from continued optimism that the Federal Reserve will take further steps to stimulate the economy.
The major averages saw further upside going into the close of trading, ending the session at their best levels of the day. The Dow jumped 322.11 points or 3 percent to 11,176.76, the Nasdaq surged up 100.68 points or 4.3 percent to 2,446.06 and the S&P 500 soared 38.53 points or 3.4 percent to 1,162.35.
While stocks saw some early strength on the heels of upbeat economic data from overseas, buying interest picked up in mid-morning trading following the release of a report from the Commerce Department showing an unexpected drop in U.S. new home sales.
The report added to recent concerns about the beleaguered housing marked but also added to speculation that the Fed may take additional action to boost the sluggish economy.
Fed officials will meet in Jackson Hole, Wyoming, this week for an annual conference, with Chairman Ben Bernanke due to deliver a closely watched speech on Friday.
Peter Boockvar, equity strategist at Miller Tabak, said, "With Bernanke speaking on Friday, there will be a lot of noise in the trading ahead of it as the 'do something,' 'do nothing' opinions square off."
The considerable strength on Wall Street may also have been due in part to a report from the Federal Deposit Insurance Corporation showing the first quarterly drop in the number of troubled banks in almost five years.
The FDIC said that the number of institutions on its "Problem List" fell to 865 in the second quarter from 888 in the first quarter. The decrease in the number of "problem" institutions in the second quarter marked the first drop since the third quarter of 2006.
Meanwhile, traders largely shrugged off news of a 5.9 magnitude earthquake in Virginia that shook much of Washington, D.C. and caused tremors as far away as New York City.
Stocks briefly moved to the downside on the heels of the news of the quake but moved back to the upside shortly afterward amid early indications that it did not cause major damage or injuries.
Sector News
Healthcare provider stocks showed a substantial move to the upside over the course of the trading day, driving the Morgan Stanley Healthcare Provider Index up by 6.6 percent. PharMerica (PMC) led the sector higher on news that Omnicare (OCR) has offered to acquire the pharmacy services provider.
PharMerica jumped by 27.1 percent after Omnicare offer to acquire the company for $15 per share in cash. The offer represented a 37 percent premium to PharMerica's closing price on Monday. However, PharMerica's board determined that the offer is not in the best interest of the company or its stockholders.
Considerable strength was also visible among semiconductor stocks, as reflected by the 5.2 percent gain posted by the Philadelphia Semiconductor Index. Nvidia (NVDA) turned one of the sector's best performances after Wells Fargo upgraded the graphics chip maker to Outperform.
Health insurance stocks also moved sharply higher on the day, with the Morgan Stanley Healthcare Payor Index surging up by 5 percent. Internet, oil service, and networking stocks also posted notable gains, moving higher along with most of the major sectors.
Meanwhile, gold stocks bucked the uptrend by the broader markets amid a pullback by the price of the precious metal. With gold for December delivery falling $30.60 to $1,861.30 an ounce, the NYSE Arca Gold Bugs Index dropped by 3.6 percent.
Other Markets
In overseas trading, stock markets across the Asia-Pacific region showed notable moves to the upside during trading on Tuesday. Japan's Nikkei 225 Index advanced by 1.2 percent, while Hong Kong's Hang Seng Index surged up by 2 percent.
The major European markets also ended the day firmly positive after seeing some late-day volatility. While the U.K.'s FTSE 100 Index rose by 0.7 percent, the French CAC 40 Index and the German DAX Index both climbed by 1.1 percent.
In the bond market, treasuries saw considerable volatility over the course of the day, eventually closing notably lower. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 4.9 basis points to 2.137 percent.
Looking Ahead
On Wednesday, traders are likely to keep an eye on a Commerce Department report on durable goods orders in the month of July. Economists expect the report to show that orders rose by 2.0 percent.
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