Reply #44: 12:05 EST Irrational Exuberance Abounding [View All]

[UpInArms]

Dow 13,750.61 172.74 (1.27%)
Nasdaq 2,675.87 24.08 (0.91%)
S&P 500 1,534.18 15.42 (1.02%)
10-Yr Bond 5.113% 0.033

NYSE Volume 1,455,118,000
Nasdaq Volume 869,980,000

12:00 pm : Stocks are trading at session highs midday as investors rally around better-than-feared June retail sales figures and another day of deal making.

Before the bell, Rio Tinto (RTP 309.00 -15.42) submitting a white-knight bid for Alcan (AL 98.80 +9.20) acted as the initial source of support. The proposed $38.1 bln deal, which represents a 33% premium to Alcoa's (AA 45.52 +3.09) hostile bid of $76 per share, has also increased the likelihood that Alcoa will also garner a hefty takeover premium should it fail to outbid Rio Tinto. Needless to say, more takeover activity in the Materials spaces again earmarks it as the day's best performing sector (+2.2%).

Of the other nine sectors trading higher, Financials ranks second. Not only does a 1.4% gain in the S&P 500's most heavily weighted sector provide a significant level of support, but the return of its leadership removes one of the market's only hurdles up to this point. The Dow is in record territory while the S&P 500 is only six points off its all-time closing high of 1539.18 reached on June 4.

With so many on Wall Street concerned of late about the health of the consumer, last month's same-store sales results checking in better than feared has also given investors something to cheer about. Wal-Mart (WMT 48.89 +1.21) posting a much stronger than anticipated 2.4% jump in June sales and backing its Q2 outlook has provided the best evidence that high gas prices and a weak housing market did not keep consumers from spending last month. DJ30 +161.60 NASDAQ +23.12 SP500 +14.20 NASDAQ Dec/Adv/Vol 949/1943/816 mln NYSE Dec/Adv/Vol 872/2267/574 mln

11:30 am : The latest wave of buying interest appears to have run into another wall of resistance. Market internals, though, continue to suggest the bulls are in complete control of today's follow-through efforts. Advancers outpace decliners on both the NYSE and Nasdaq by a 2-to-1 margin while the ratio of up to down volume offers even more conviction on the part of buyers.

All 10 sectors are trading sharply higher, with the one exception being Utilities. It is up only 0.1% as a modest rise in bond yields diminishes the attraction of owning dividend-paying stocks. However, with only a 3.5% weighting on the S&P 500, such limited influence from a defensive-oriented sector merely underscores the improved underlying tone to today's rally and potential for further upside. DJ30 +141.77 NASDAQ +18.68 SP500 +12.37 NASDAQ Dec/Adv/Vol 948/1892/676 mln NYSE Dec/Adv/Vol 898/2198/472 mln