Stocks Stage Strong Rebound

Stocks staged a strong rebound on Wednesday led by Cisco Systems and cyclical and retail stocks.

The ISDEX was unchanged at 145, and the Nasdaq gained 24 to 1767. The S&P 500 rose 12 to 1130, and the Dow surged 173 to 10,381. Volume surged to 1.44 billion shares on the NYSE, and 1.95 billion on the Nasdaq. Advancers led 22 to 8 on the NYSE, and 21 to 14 on the Nasdaq.

After the close, Yahoo slipped after beating estimates because much of the upside came from the acquisition of HotJobs. Yahoo said ad spending has stabilized but remains tough. Also after hours, and Redback missed revenue estimates, and Cognos beat estimates.

During the day, Cisco surged after analysts came to the stock’s defense after yesterday’s plunge on rumors that the company will warn.

Traders attributed the rally in cyclical stocks to comments by superstar bond fund manager Bill Gross that the Fed may not be able to raise interest rates aggressively because corporate profitability depends on low interest rates.

Research In Motion fell after topping estimates but warning.

AOL fell to a new 52-week low after CS First Boston unloaded 18.4 million shares at $20.

EMC climbed back above $10 after briefly falling below that important level. Studies have shown that most stocks that fall below $10 never recover, and many mutual funds won’t own stocks below that level.

AT&T kept telecom stocks on the defensive after announcing a reverse stock split, and astonishing move for a Dow component.

NVIDIA fell on weak Xbox sales.

Siebel dropped on company comments that business remains difficult. got some good news; the company will begin trading on the Nasdaq national market again under its old HOMS symbol.

Sonus rose after beating estimates, and Infosys surged after beating revenue estimates.

Some technical comments on the market: Note: To see the charts in the text email newsletter, click on the story link at the top of the newsletter.

The Dow (first chart) broke out of its down channel today, a big plus for the bulls. However, there were a number of negative signs underneath the big gains. High TRIN readings (above 1.2) on the NYSE and the Nasdaq means that there was more volume in declining stocks than in advancing ones, and down volume actually led up volume on the Nasdaq. The TRIN needs to get below 1.0, and preferably below .80, if this rally is to have legs. Also, financial stocks didn’t participate in the rally; the Dow’s financial stocks contributed nothing to the big gain. The market’s reaction to GE’s earnings tomorrow morning could be a good indication of whether the rally is sustainable. But in the meantime, there’s no arguing with price, and there is no doubt that the Dow broke out today. 10,350 is now critical support (see second chart below), and 10,500 is tough resistance. The S&P (third chart) would break out above 1132. The Nasdaq (fourth chart) needs to break above 1775 to begin to look good. The Nasdaq 100 (fifth chart) tested and held its February lows today, a plus for the techs.





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