Oil’s Dip Takes Lid Off Stocks

With the volatility winding through the market in the past couple of weeks,
it's undoubtedly been of some comfort to bulls to take a longer-term view of
stocks – and find evidence that the trend higher is still intact. On Tuesday,
stocks did even more to keep the longer-term rally intact posting strong gains
amid a slight pullback in the price of oil, which has been stocks' master for
about half a month. The Dow Jones Industrial Average gained 124 points to
12,214, the Nasdaq rose 20 points to 2766 and the S&P 500 added 9 points to
1322. Oil prices stayed above $105 a barrel, but that was still a drop of 0.4%,
which, when coupled with various reports that an endgame in Libya may (or may
not) be at hand, and equities took the opening offered by any perceived
lessening in global uncertainty. As we've seen for some time now, investors'
buoyed confidence can often be discerned by the performance in small-caps, which
were big outperformers on Tuesday: The Russell 2000 Index gained 1.5% Elsewhere,
the day's winners and losers came down as one would expect in a market largely
at the mercy of how much people want to pay for a barrel of oil. Airlines had a
big day Tuesday, on the heels of a late rally Monday when oil prices retreated
into the market close. Shares of U.S. Air (NYSE: LCC ) gained about 12%, while
Delta Air Lines (NYSE: DAL ) shot more than 10% higher. Automobile stocks also
pushed higher – both Ford (NYSE: F ) and General Motors (NYSE: GM ) added more
than 3%. With added confidence in stocks, the traditional flight-to-safety bets
were in retreat, at least for a day. Bonds finished lower, with the 10-year
note's yield climbing to 3.54%. The dollar pushed higher, which combined with
oil's flatlining, pushed gold and silver slightly lower after notching fresh
highs on Monday. Stocks are now back to within 1.5% (on the S&P 500) of their
2011 highs, but we've also been here before – notably, after Thursday's
big rally. While the bulls' trendline is safe for now, another push higher
will be needed soon to keep chart-watchers on board.