Stocks Break Out to Three-Week Highs

By the end of Tuesday’s trading session, it appears conclusive that the momentum-fueled rally in stocks is officially back on. With investors barely batting an eye recently at the undiminished risk-inducing trifecta of a nuclear crisis in Japan, continued unrest in the Middle East and the possibility of more sovereign debt in Europe, stocks are now within 2% of their highs for the year, as measured by the S&P 500. That index rose 9 points, or 0.7%, to 1319, closing at its highest level since March 9. The Dow Jones Industrial Average rose 81 points, or 0.7%, to 12,279 and the Nasdaq gained 26 points, or 1%, to 2757. It’s that outperformance by tech stocks that has been a regular contributor during the recent post-earthquake rally, while being an underperformer on the rare occasions when stocks have fallen. So, too, have small-caps, and on cue, that bunch kicked back into gear — the Russell 2000 gained 0.9%. The combination of Nasdaq and small-cap names has also generally meant that investors are returning to sifting through smaller energy names, as means to a quick profit in that sector. With crude oil prices moving well above $104 a barrel on Tuesday, it’s no surprise oil services was one of the day’s biggest gainers. The Oil Services HOLDRs (AMEX: OIH ) exchange-traded fund gained 2.2%, as top holding Schlumberger (NYSE: SLB ) surged more than 4%. But note also the jump of nearly 7% by $250 million market-cap name  Union Drilling (NASDAQ: UDRL ). Similarly in the speculative momentum chronicles, we saw the return of of rare earth metals after a two-day dip. The Market Vectors Rare Earth/Strategic Earth Metals (NYSE: REMX ) ETF rose nearly 3%. Bond investors waved the white flag, as the 10-year Treasury note’s yield moved to 3.48%, its highest level since March 8. Not that all boats were lifted. Airlines, as they have in the past, were off on the resurgence in crude prices, while homebuilders took it on the chin, due to a report from quarterly order declines from Lennar (NYSE: LEN ), which fell 3.4%, as well as the S&P/Case-Shiller 20-city index of home prices, which showed a 3.1% decline in February.
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