US Market Commentary (After Market Close): Despite Choppy Trade, Stocks Make Solid Gains

Stocks spent the session in a sideways chop, but managed to settle with solid gains. The advance came in the face of modest strength in the U.S. dollar, weakness among financial issues, and a mixed weekly jobless claims report. Participation lacked for most of the session, though.

Trade was choppy for the entire session, but that didn't take stocks out of a relatively narrow range, nor did it derail a broad-based advance. There was a flurry of selling late in the session that caused stocks to surrender some of their gains, but the broader market was able to garner support as the S&P 500 came in contact with the 1100 mark.

In the end, advancing issues outnumbered decliners by more than 2-to-1. As broad as the advance was, it was even more impressive since it came despite a stronger dollar. Gains by the greenback have most often led to selling in the stock market, due to the drag of a stronger dollar on commodity prices and repatriated profits from multinationals, but stocks were able to hold their gains as the Dollar Index worked its way to a 0.1% gain.

Though the broader market showed resolve, financials lagged for the entire session. The sector settled with a 0.2% loss as ongoing chatter about a potential equity raise by Citigroup (C 3.87, +0.01) to repay its TARP funds failed to attract support for the sector. Citi has yet to unveil an official plan.

On a related note, Treasury Secretary Geithner appeared before the Congressional Oversight Panel to make a case for extending the $700 billion TARP plan. Geithner expressed that TARP will help the U.S. maintain the capacity to address potential threats to its financial system and decrease the need for future intervention.

Some market watchers consider it unclear why Treasury wants to extend TARP, but has reportedly let some financial outfits entertain the prospect of TARP repayment.

Initial jobless claims for the week ending December 5 totaled 474,000, which is worse than the 455,000 initial claims that had been widely expected and is up from the previous week's tally of 457,000 initial claims. However, continuing claims made a sharp move down to 5.16 million from 5.46 million. The consensus had called for 5.45 million continuing claims.

The trade deficit for October totaled $32.9 billion, which is less than the $36.8 billion deficit that had been widely expected. It is also an improvement from the upwardly revised $35.7 billion deficit that was registered in September. Meanwhile, the November Treasury Budget was expected to show a shortfall of $131.6 billion, but it was less steep at $120.3 billion.

An auction of 30-year Bonds attracted a bid-to-cover ratio of 2.45, which is largely in-line with the recent average of 2.41. A lot of commentary focused on the fact that yield had to reach 4.52% to spur interest, but half the bidders were willing to take a yield below 4.42%. Still, Treasuries turned lower in the wake of the announcement. The benchmark 10-year Note finished roughly 14 ticks lower, but the 30-year Bond dropped more than one full point. Their yields stand at 3.49% and 4.49%, respectively.

Stocks came under a bit of pressure following the midday announcement, but the move was contained as buyers continued to provide support.

Shares of retailers (+1.5%) were among the best performers; that helped the consumer discretionary sector post a 1.4% gain, which was the best of any major sector.

Health care stocks were close behind with an impressive 1.2% gain, which came even though Eli Lilly (LLY 35.02, -1.54) showed considerable weakness after it reaffirmed downside guidance for fiscal 2009 and in-line guidance for fiscal 2010.

Participation had lacked for most of the session, but a late surge in trading volume sent the number of shares exchanged on the NYSE above 1 billion. Still, that level is well below the 50-day moving average of 1.2 billion.