[BRIEFING.COM] During a day which showed little promise early on in the way of extending a relief rally in stocks fueled by bonds a day earlier, investors on Wednesday seemed to disregard the renewed bearish tone in Treasuries altogether; that is, after the Fed's Beige Book provided just enough of an impetus to push the major averages through key technical levels. Eight out of ten economic sectors closed to the upside as follow-through buying efforts lifted the S&P 500 above 1,300 for the first time since May 2001.
Stocks opened with little fanfare and traded in a very narrow range most of the day until 2:00 ET, when the Fed showed that "labor cost pressures were little changed" and that "prices at the retail level increased at only a moderate rate," providing some evidence, albeit very minor, of less incentive to go beyond what is currently expected on rate hikes. More notably was the fact that the Dow, S&P and Nasdaq garnered enough support to push through initial resistance levels of 11,175, 1,300 and 2,300, respectively.
Bonds, meanwhile, consolidated some of the gains behind the 10-yr note's biggest one-day advance since December a day earlier. An unexpected rise in the NY Empire Manufacturing Index to a very strong 31.2 (consensus 19.0) stalled follow-through buying in bonds and left traders cautious ahead of tomorrow's closely-watched CPI report.
Among the eight sectors posting gains, Industrials paced the way higher. Upside EPS guidance from Union Pacific (UNP 90.42 +5.21), which plays into our Overweight rating on the sector and our bullish opinion on the railroads, provided the bulk of sector support. Materials also turned in strong performance, led by an optimistic outlook from DuPont (DD 42.80 +0.88). Technology was strong across the board, getting a lift from several analyst upgrades (e.g. SNDK, PMCS, LRCX, STX, and ATVI).
Consumer Discretionary was in focus after New York Attorney General Eliot Spitzer sued H&R Block (HRB 20.66 -1.34) for fraudulent marketing of IRAs, but the losses in specialized consulting services -- the day's worst performing industry group -- was offset set by strength in retail and autos. Blowout Q4 results from Sears Holdings (SHLD 132.29 +15.02) and reports that Kohlberg Kravis Roberts submitted a $12.5-13.0 bln nonbinding bid to purchase a majority stake in General Motors' (GM 21.50 +0.36) GMAC division were sources of support.
Financial was also a focal point after Lehman Brothers (LEH 144.12 -1.18) posted record results, which plays into our Market Weight rating on the sector. However, the stock, which was up 2% yesterday in sympathy with strong earnings from Goldman Sachs (GS 148.92 -0.50), coupled with rising bond yields, kept sector gains from the S&P's most influential sector in check. Even Energy, despite a 1.4% decline in crude futures which may have offered investors additional solace, attracted buyers and extended its year-to-date gain to nearly 7%. NYSE Adv/Dec 2104/1158...Nasdaq Adv/Dec 1881/1162
DOW Price at posting:
0.0¢ Sentiment: None Disclosure: Not Held
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