U.S. Stocks Close Firmly Positive Following Late-Day Volatility

Stocks moved sharply higher in morning trading on Wednesday before seeing considerable volatility late in the session. The major averages pulled back well off their highs but moved back to the upside going into the close of trading.

The major averages all finished the day firmly in positive territory. The Dow jumped 329.04 points or 1.2 percent to 27,781.70, the Nasdaq climbed 82.26 points or 0.7 percent to 11,167.51 and the S&P 500 advanced 27.53 points or 0.8 percent to 3,363.00.

The volatility seen late in the trading day came amid uncertainty about a potential agreement on a new coronavirus stimulus bill.

The pullback by the major averages came after Senate Majority Leader Mitch McConnell said Republicans and Democrats remain “far apart” on a deal.

However, stocks rebounded as Treasury Secretary Steven Mnuchin and House Speaker Nancy Pelosi failed to reach an agreement after a meeting today but indicated talks would continue.

The morning rally on Wall Street came after Mnuchin said he is “hopeful” about reaching an agreement on a new stimulus bill.

“I say we’re going to give it one more serious try to get this done and I think we’re hopeful that we can get something done,” Mnuchin said during the Delivering Alpha conference presented by CNBC and Institutional Investor. “I think there is a reasonable compromise here.”

The markets also benefited from the release of some upbeat U.S. economic data, including a report from payroll processor ADP showing private sector employment surged up by more than expected in the month of September.

ADP said private sector employment spiked by 749,000 jobs in September after jumping by an upwardly revised 481,000 jobs in August.

Economists had expected employment to increase by 650,000 jobs compared to the addition of 428,000 jobs originally reported for the previous month.

The National Association of Realtors also released a report showing pending home sales jumped to a record high in the month of August.

NAR said its pending home sales index spiked by 8.8 percent to 132.8 in August after surging up by 5.9 percent to 122.1 in July. Economists had expected pending home sales to increase by 3.2 percent.

A pending home sale is one in which a contract was signed but not yet closed. Normally, it takes four to six weeks to close a contracted sale.

Sector News

Housing stocks ended the day significantly higher, resulting in a 1.6 percent advance by the Philadelphia Housing Sector Index.

Considerable strength was also visible among healthcare stocks, as reflected by the 1.5 percent gain posted by the Dow Jones U.S. Health Care Index.

Banking stocks also turned in a strong performance on the day, driving the KBW Bank Index up by 1.4 percent.

On the other hand, computer hardware stocks showed a notable move to the downside, dragging the NYSE Arca Computer Hardware Index down by 1.2 percent.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Wednesday. Japan’s Nikkei 225 Index tumbled by 1.5 percent, while Hong Kong’s Hang Seng Index advanced by 0.8 percent.

Meanwhile, the major European markets all moved to the downside on the day. While the French CAC 40 Index slid by 0.6 percent, the German DAX Index and the U.K.’s FTSE 100 Index both fell by 0.5 percent.

In the bond market, treasuries climbed off their worst levels in afternoon trading but remained in the red. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 3.2 basis points to 0.677 percent.

Looking Ahead

Trading on Thursday may be impacted by reaction to another batch of economic data, including reports on weekly jobless claims, personal income and spending, manufacturing activity and construction spending.

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