Stocks Stand Tall

It's back to business as usual. After a little more than two weeks of
sideways trading that included one eye-opening plunge last Friday, stocks
exploded higher on Tuesday, attaining two key technical levels that makes
further upside the default expectation. The Dow Jones tacked on 148 points to
close at 12,040, its first close above 12,000 since June 2008, the S&P
500 added 1.7% to close at 1308 and the Nasdaq jumped 1.9% to close at 2751.
Several reasons were tossed out in the media for Tuesday's uber-rally: a
strong ISM manufacturing index report and the possibility of easing tensions in
Egypt being a couple of the most popular suggestions. Both of these events, of
course, do nothing but support the idea that discerning the reason for the stock
market's hourly or daily – or weekly – movements is next to impossible. As
good a reason as any is that when an asset appreciates nearly 30% in almost five
months, people tend to take notice and begin to think that they, too, should be
buying. In other words, why start now to suggest logical or fundamental reasons
for the risk-on frenzy among investors? The bulls' rout of the bears on
Tuesday was fairly impressive: advancers on the New York Stock Exchange bested
decliners by about 5 to 1, while new 52-week highs beat new 52-week lows, 335-9.
Stocks of all sizes performed well, with small-caps outperforming the most. If
there was perhaps any notable sector strength it was in financials, showing
again that a broad-based rally of any duration is only possible when the sector
joins in. The Financial Select Sector SPDR (NYSE: XLF ) exchange-traded fund was
up more than 2% on Tuesday after trading virtually flat since Jan. 13. Bank of
America (NYSE: BAC )    had a particularly strong day, climbing 4.2% to
$14.31. Bonds again sold off, pushing the yield on the 10-year note to 3.45%,
meaning the rest of the week will offer a test as to whether yields finally make
the run toward 4% and beyond expected this year by many analysts. Commodities
finished mixed, with crude oil falling back under $91 after a huge move higher
on Monday. Gold and silver were up modestly on a weaker dollar, while industrial
commodities were the sector's strength. Cynics would point out that higher
input (read: commodity) prices are likely to come home to roost one day in the
form of lower corporate margins or inflation, or both. Eventually, the cynic
would say, isn't there a downside to corn spot prices rising 8%, rice jumping
more than 10%, and cotton up nearly 20% in one month alone? But like I said, why
let fundamentals into it?