briefly nb adv against dec

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[BRIEFING.COM] On Thursday, stocks rallied even higher than the day before as government reports and encouraging commentary from Bernanke suggested the economy remains resilient.

Strong follow-through in stocks was seen at the onset of trading as a sense that the market is still oversold on a short-term basis continued to attract bargain hunters on the heels of Wednesday's technical bounce. Recognition that stocks shrugged off a worrisome core-CPI report, and the understanding that the Fed will be raising rates again at its June 28-29 FOMC meeting, lent credence to the argument that a bottom had been reached. Before yesterday's relief rally got underway, the Nasdaq and Russell 2000 were trading 13% and 14.6% below their recent peaks, reflective of a technical "correction" that had also been realized in roughly two-third of the global markets. With major European bourses posting average gains of 2.0% and closing near session highs today, the stage was set for U.S. indices to follow suit.

In addition to material gains across the board in foreign markets and reasonable valuations, as the P/E ratio on the SnP 500 for operating earnings is only 15.5, investors showed a renewed sense of enthusiasm to get back into stocks that was supported a batch of encouraging economic data. Initial claims fell to 295,000, the lowest level since mid-February, which was reflective of strong labor conditions and a positive sign for the economy. Investors also sifted through strong reads on the NY Empire Index and Philadelphia Fed Index, which suggested that manufacturing remains on a decent growth path and acted as reminders that the nervousness in the financial markets did not necessarily translate into the real world economy. While the reports exacerbated nervousness in the Treasury market, as strong growth also fuel concerns about further Fed tightening to keep inflation in check, the reports were embraced by equity investors concerned about slowing economic growth.

Fueling a rising tide that lifted virtually every boat, as only 1 of the 147 SnP 500 industry groups did not partake in today's broad-based rally, were remarks from Fed Chairman Bernanke. While Bernanke said that commodity price hikes contribute some to recent core inflation, he also reassured investors that the impact of higher energy prices will probably be "manageable" and that the economy remains resilient despite the drag of higher oil on households - testimony that traders used as the latest justification to keep on buying. To wit, the Dow was up a respectable 80 points before Bernanke spoke but climbed as much 219 points as short covering assisted in the indices breaking through key resistance levels, further suggesting that the bears had all but gone into hibernation... at least for the time being. We still don't believe a sustained rally is likely and maintain a Neutral view until the market gets an indication that inflation is easing and that the end of Fed tightening is more visible.

Of the ten economic sectors posting respectable gains, Energy and Materials again turned in the best overall performances as weakness in the greenback made dollar-denominated commodities like oil and gold more attractive. Financials, which failed to participate in yesterday's rally and left many questioning the sustainability of the market's gains in the absence of its leadership, and another rebound in Technology -- the year's worst performing sector -- were the most influential sectors to the upside. Despite a continued slide in Treasuries lifting bond yields, the rate-sensitive Financials sector got its biggest boost from a huge rebound in brokerage. All 12 components in the PHLX Securities Broker/Dealer Index surged, benefiting in large part from a third straight record quarter from Bear Stearns (BSC 131.33 +7.13), which plays into our favorable opinion on brokers.

Technology was strong across the board, led by a 4.2% surge in semiconductor. All 19 components in the PHLX Semiconductor Sector Index closed higher with Marvell Technology (MRVL 52.19 +3.46), a suggested holding in our Active Portfolio, leading the charge with a 7% gain. Industrials also provided some influential leadership, getting a lift from Caterpillar (CAT 70.85 +3.37), which reiterated FY06 EPS guidance and raised its dividend, and strong follow-through buying in Boeing (BA 84.81 +2.80), which added 3.4% to Wednesday's 6.5% surge.
NYSE Adv/Dec 2672/626...Nasdaq Adv/Dec 2482/604