(RTTNews) - Stocks rose by notable margins on Monday, as traders continued to buy into the markets based on recent economic optimism. The major averages all closed on the upside by comfortable margins, reaching their best closing levels of the year despite a day that was relatively light on catalysts.

The strength in the markets came as traders reacted to the latest batch of earnings news, with Gannett (GCI) and Eaton (ETN) turning in strong performances after both companies reported third quarter earnings that exceeded analyst estimates.

Separately, Federal Reserve Chairman Ben Bernanke said that the U.S. has benefited from Asia’s rapid development and integration into the world economy, but he said that both regions need to take steps to avoid financial imbalances in the future.

Speaking at the San Francisco Federal Reserve Bank’s conference on Asia and the Global Financial Crisis in Santa Barbara, Bernanke said that Asian economies are also leading the world’s economic recovery but that they also must increase spending.

“For their part, to achieve balanced and sustainable growth, the authorities in surplus countries, including most Asian economies, must act to narrow the gap between saving and investment and to raise domestic demand,” he said in prepared remarks. “In large part, such actions should focus on boosting consumption.”

Meanwhile, homebuilder confidence unexpectedly slipped in the month of October, according to a report released by the National Association Of Home Builders, with the decrease reflecting concerns about the upcoming expiration of the $8,000 tax credit for first-time buyers.

The report showed that the NAHB/Wells Fargo Housing Market Index edged down to 18 in October from 19 in September. The decrease came as a surprise to economists, who had expected the index to edge up to a reading of 20.

The major averages moved roughly sideways throughout the afternoon, ending the session near their best levels of the day. The Dow closed up by 96.28 points or 1 percent at 10,092.19, the Nasdaq advanced 19.52 points or 0.9 percent to end at 2,176.32 and the S&P 500 rose by 10.23 points or 0.9 percent to 1,097.91.

Sector News

Commercial real estate and healthcare provider stocks saw notable gains, with the Morgan Stanley REIT Index and the Morgan Stanley Healthcare Provider Index rising by 2 percent and 1.7 percent, respectively.

The commercial real estate index remained stuck in a recent trading range, while the healthcare provider index closed at a fresh historic high.

Oil service stocks rose by substantial margins on the day, as reflected by the 1.6 percent gain posted by the Philadelphia Oil Service Index. The index extended its recent gains and closed at its best level in over a year.

One of the leading gainers in the sector was Smith International Inc. (SII), which rose by 4.3 percent, at its best closing price in over eleven months. The gains by oil stocks came amid a continued increase by the price of oil, which rose by $1.08 to $79.61 a barrel.

Utility, steel, semiconductor, pharmaceutical and electronic storage stocks also saw buying interest, reflecting the day’s broad based strength.

Dow Components

The Dow was led higher by Caterpillar (CAT), which rose by 6 percent, the strongest percentage gain in the index. With the can, the construction equipment maker ended the session at its best closing level in over a year.

The move comes ahead of the firm’s earnings report; due out before the bell tomorrow, with analysts expecting earnings of $0.06 per share on revenues of $7.49 billion. In the year-earlier quarter, the company reported earnings of $1.39 per share on revenues of $12.9 billion.

Merck (MRK) also saw notable strength, with the drug giant rising by 1.6 percent. The advance lifted the stock to its best finish in over one year.

American Express (AXP), Disney (DIS), DuPont (DD), Home Depot (HD), Wal-Mart (WMT) and Pfizer (PFE) also moved higher on the day, largely setting fresh multi-month closing highs.

On the other hand, General Electric (GE) was one of the few losers in the Dow, sliding by 1.5 percent. Despite the pullback the stock remains near last month’s eight month closing high.

Other Markets

The major Asian markets ended Friday’s session on a mixed note, with Japan’s benchmark Nikkei 225 Index declining 0.2 percent while Hong Kong’s Hang Seng Index rose 1.2 percent.

Meanwhile, the major European markets closed considerably higher, with the French CAC 40 Index and the German DAX Index advancing by 1.7 percent and 1.9 percent, respectively, while the U.K.’s FTSE 100 Index rose by 1.1 percent.

In the bond markets, treasuries saw modest strength, with the benchmark ten-year yield closing at 3.395 percent, falling by 2.2 basis points on the day.

Looking Ahead

Tuesday, traders will focus on data on housing starts and producer prices on Tuesday, while the Bank of Canada’s interest rate decision may also attract some attention.

Additionally, the markets will react to a number of earnings reports, with computing and electronics company Apple Inc. (AAPL), medical devices manufacturer Boston Scientific Corp. (BSX), and mobile phone chip maker Texas Instruments Inc. (TXN) reporting their quarterly results after the closing bell today.

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Posted in Categories: Canada, Economy, Eurozone, Japan, Releases, USA.

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