YAHOO [BRIEFING.COM]: Buying interest on the back of strong GDP data from China and comments from Fed Chairman Bernanke had the major equity averages up more than 1% today, but that gain was slashed as stocks gradually descended in afternoon trade.

The mood among market participants this morning was much improved from the negativity that permeated trade during the three prior sessions. Participants were partly encouraged by news that China reported second quarter GDP growth of 9.5% over the same period one year ago. The torrid clip proved greater than expected, and suggested that China remains a primary driver of the global economic rebound.

Concerns about the fiscal health of countries in the eurozone's periphery cooled, at least for today, to help the euro rally against the dollar. The dollar dropped another leg lower amid comments from Fed Chairman Bernanke.

During his semiannual testimony on monetary policy to the House Financial Services Committee, Bernanke stated that the Fed remains prepared to adjust monetary policy in the event that economic developments warrant such a move. Bernanke also noted that the Fed has reached a consensus on the steps involved in an exit strategy from current policy. As we expressed yesterday, it is only natural, and should even be expected, that the Fed prudently discuss such scenarios.

Buying interest picked up after participants digested Bernanke's prepared remarks. The stock market's climb was broad based, but natural resource plays staged the strongest gains. In fact, energy stocks were up 2%, as a group. Materials stocks weren't far behind.

The two sectors got an added boost because of a bounce by many underlying commodities. Oil prices had pushed up to a gain of more than 1% on the back of a surprisingly large draw down in weekly oil inventories before an afternoon pullback left it to settle pit trade with a 0.6% gain at $98.05 per barrel. Meanwhile, gold prices rallied to a record high of almost $1589 per ounce before it settled with a 1.5% gain at $1585.30 per ounce.

However, stocks struggled to sustain their gains as action advanced into the afternoon. The loss of support left the major equity averages to drift lower. Only a brief bit of buying interest in the final few minutes kept the stock market from settling at its session low.

Defensive-oriented stocks, which had already lagged all session, suffered the only losses. Specifically, utilities fell 0.2% while telecom closed with a 0.1% loss. Consumer staples stocks collectively closed at the unchanged mark.

A traditional safe haven, the benchmark 10-year Note traded with weakness in the early going, but was able to rebound amid the stock market's afternoon drift. It also got a boost from strong auction results. The 10-year Note sale drew a bid-to-cover of 3.18, dollar demand of $66.7 billion, and an indirect bidder participation rate of 42.0%. For comparison, an average of the past six auctions gives a bid-to-cover of 3.20, dollar demand of $70.4 billion, and an indirect bidder rate of 52.3%.

It was a very eventful session for precious metals, which rallied on the continued flight to safety from concerns about the situation in Europe, as well as commentary from the Fed Chairman's testimony this morning that mentioned that the Fed remains prepared to respond should economic developments indicate that an adjustment in the stance of monetary policy would be appropriate. August gold gained 1.5 % to close at $1585.30 per ounce. Gold traded to a new all time high at $1588.90. Sept silver surged 6.9% to finish at $38.10 per ounce. Silver futures put in highs at $38.34, their best levels in close to 1.5 months.

August crude oil finished higher by 0.6% to $98.05 per barrel. This morning's inventory data, which showed a larger-than-expected draw down, sent futures into positive territory. They extended that rally heading into afternoon trade, where they notched highs at $99.21. The rally stalled at that high and futures spent the remainder of the session pulling back from those highs to end with modest gains. August natural gas ended up 1.6% to $4.41 per MMBtu, extending its rally to a fourth consecutive session.

Advancing Sectors: Materials +0.8%, Energy +0.7%, Consumer Discretionary +0.5%, Industrials +0.4%, Tech +0.3%, Health Care +0.3%, Financials +0.2%
Unchanged: Consumer Staples
Declining Sectors: Telecom -0.1%, Utilities -0.2%DJ30 +44.73 NASDAQ +15.01 NQ100 +0.4% R2K +0.9% SP400 +0.3% SP500 +4.08 NASDAQ Adv/Vol/Dec 1821/1.90 bln/761 NYSE Adv/Vol/Dec 2015/883 mln/987