Upbeat U.S. Economic Data Leads To Strength On Wall Street

After ending the previous session roughly flat, stocks moved mostly higher during trading on Tuesday. The major averages all moved to the upside on the day, although buying interest waned as the trading day progressed.

The Dow and the S&P 500 pulled back well off their highs in late-day trading, while the tech-heavy Nasdaq remained firmly positive.

The Nasdaq advanced 120.01 points or 0.8 percent to 15,973.86, just shy of the record closing high set last Monday. The S&P 500 also ended the day just below its record closing high, up 181.0 points or 0.4 percent to 4,700.90.

Meanwhile, the Dow ended the day up 54.77 points or 0.2 percent at 36,142.22 after rising by more than 200 points earlier in the session.

The strength on Wall Street partly reflected a positive reaction to some upbeat U.S. economic data, including a Commerce Department report showing retail sales shot up by more than expected in the month of October.

The report said retail sales spiked by 1.7 percent in October after climbing by an upwardly revised 0.8 percent in September.

Economists had expected retail sales to jump by 1.4 percent compared to the 0.7 percent increase originally reported for the previous month.

Excluding sales by motor vehicles and parts dealers, retail sales still surged up by 1.7 percent in October after rising by 0.7 percent in September. Ex-auto sales were expected to advance by 1.0 percent.

However, analysts noted that the strong retail sales growth during the month was largely due to inflation, as retail sales are reported in nominal dollars.

“Adjusted for inflation, real sales were closer to a 0.1% headline increase and ex-gasoline a 0.3% increase,” said Will Compernolle, Senior Economist at FHN Financial. “The inflation-adjusted spending is still above the pre-pandemic trend but slowing.”

The Federal Reserve also released a report showing industrial production rebounded by much more than expected in the month of October.

The report showed industrial production surged up by 1.6 percent in October after tumbling by 1.3 percent in September. Economists had expected industrial production to increase by 0.7 percent.

The Fed said about half of the rebound in industrial production in October reflected a recovery from the effects of Hurricane Ida.

The uptick by the Dow came amid a notable advance by shares of Home Depot (HD), with the home improvement retailer jumping by 5.7 percent after reporting better than expected quarter results.

Meanwhile, retail giant Walmart (WMT) moved to the downside despite reporting third quarter results that exceeded analyst estimates and raising its full-year guidance.

Sector News

Semiconductor stocks moved sharply higher over the course of the session, driving the Philadelphia Semiconductor Index up by 1.7 percent to a new record closing high.

Considerable strength was also visible among housing stocks, as reflected by the 1.4 percent gain posted by the Philadelphia Housing Sector Index.

The strength in the housing sector came after the National Association of Home Builders released a report unexpectedly showing a continued improvement in U.S. homebuilder confidence in the month of November.

The report showed the NAHB/Wells Fargo Housing Market Index rose for the third straight month, climbing to 83 in November from 80 in October. The increase surprised economists, who had expected the index to come in unchanged.

Software and retail stocks also saw notable strength on the day, while tobacco and gold stocks gave back ground following recent strength.

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 inched up by 0.1 percent, while China’s Shanghai Composite Index fell by 0.3 percent.

The major European markets also finished the session mixed. While the U.K.’s FTSE 100 Index dipped by 0.3 percent, the French CAC 40 Index rose by 0.3 percent and the German DAX Index climbed by 0.6 percent.

In the bond market, treasuries showed a lack of direction before ending the day slightly lower. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, inched up by 1.1 basis points to 1.634 percent.

Looking Ahead

Following the slew of U.S. economic data released this morning, the economic calendar for Wednesday is relatively quiet.

Traders are still likely to keep an eye on the Commerce Department’s report on new residential construction as well as comments by a number of Fed officials.

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