Reply #52: In closing, everything's just great! Check the blather. [View All]

...except for the bond market...

Dow 11,053.53 +60.12 (+0.55%)
Nasdaq 2,314.64 +33.25 (+1.46%)
S&P 500 1,291.24 +10.58 (+0.83%)
10-Yr Bond 45.89 +0.42 (+0.92%)
NYSE Volume 2,275,455,000
Nasdaq Volume 2,238,538,000

4:20 pm : Buyers dominated the trading action, and helped correct a good part of Tuesday's Google-induced drop. The Nasdaq fully erased yesterday's loss, and the Dow and S&P significantly rebounded. The action showed that the broader market's reaction to comments from Google's management, which were assertions of the obvious, was overdone. Nonetheless, it reflected an underlying sense of nervousness and reflects our view that the market will continue to trade in a choppy fashion until the interest rate uncertainty is quelled.

Bargain hunters focused much of their attention on tech stocks (+2.0%), and buying there was broad-based. Today, the sector nearly doubled its year-to-date gain and led the broader market's advance. Surging semiconductors were a particularly strong source of support, and communication equipment issues also soared. Application software, following better than expected earnings results and guidance from Autodesk (ADSK 41.57 +3.92), was another strong pocket. Solid gains in a number of bellwethers were supportive. Two of the brightest were Hewlett-Packard (HPQ 34.01 +1.20) and Cisco Systems (CSCO 21.06 +0.82), the latter of which is one of our recommended holdings for active investors.

The Energy sector (+1.6%) also helped lift the broader market. Drillers fared especially well. Rowan Companies (RDC 41.25 +1.00) jumped after delivering record fourth quarter revenues and upside earnings, and Transocean (RIG 77.42 +3.24), another of our portfolio picks, climbed on news that it won a Chevron (CVX 57.21 +0.73) contract to build a deepwater drillship. On a related note, the Energy Department released its latest inventory stats this morning. Crude and gasoline supplies rose slightly more than had been expected, and the drawdown in distillates matched analysts' forecast. Like the rest of today's economic data, the report brought no real surprise. Crude continued to recover from Monday's plunge. Its advance was enough to draw buyers back to the Energy sector, but, at the same time, it was modest enough that the broader market was unperturbed.

Led by steel, metals stocks also advanced and helped take the Materials sector 1.1% higher. Telecom, the S&P's best performer year-to-date, continued its outperformance and rose 1.4%. Despite a weighty decline in General Motors (GM 19.92 -0.39), the Consumer Discretionary advanced 0.7%. The auto manufacturers reported February sales today, and GM and Ford (F 7.92 -0.02) both disappointed. DaimlerChrysler (DCX 56.48 +1.01), on the other hand, booked an unexpected gain. An earnings and guidance-related rise in Brown-Forman (BF-B 75.72 +5.36) supported Consumer Staples (+0.3%), and earnings-related strength in Medco Health Solutions (MHS 59.28 +3.56) helped Healthcare (+0.2%) recover. The Utilities sector (-0.4%) was the sole decliner, and its loss was fully offset by its nine counterparts.

It was another heavy day of economic data. The docket included personal income and spending data that rose relatively close to expectations, a better than expected read on the ISM Index, and lower than expected construction spending growth. The core PCE deflator, which was arguably the most important piece of data released today, was up an ambiguous 0.2%. The year-over-year gain was 1.8%, which is slightly below the upper end of the Fed's forecast range. In aggregate, the reports brought little surprise and do not affect our neutral market view or interest rate expectations.DJ30 +60.12 NASDAQ +33.25 SP500 +10.58 NASDAQ Dec/Adv/Vol 957/2109/2.20 bln NYSE Dec/Adv/Vol 952/2308/1.63 bln