China raised interest rates by 25 basis points this past weekend, and the world’s stock markets did a flip — that is, all of the world’s markets except in the United States. Here stocks opened lower as a result of the holiday surprise, but then spent most of the day recovering from the early losses and finally closed mixed.

Following the surprise announcement from China’s central bank, the financials rallied, led by regional banks. Then technology stocks caught the breeze, and the remainder of the day was spent in a recovery. Bank of America Corporation (NYSE: BAC) rose 1.6% and JPMorgan Chase & Co. (NYSE: JPM) gained 1.4%. And Cisco Systems, Inc. (NASDAQ: CSCO) rose 2.4% following a Barron’s article that said the tech giant is undervalued.

The energy sector fell, as did most commodities, based on the fear that an increase in rates would result in lower demand. But even in the energy and metals sectors, the losses were minimal. Alcoa Inc. (NYSE: AA) fell 0.7% and the PowerShares DB Base Metals Fund (NYSE: DBB) closed 0.81% higher.

In corporate news, H&R Block, Inc. (NYSE: HRB) fell 7% after it said that HSBC Holdings plc (NYSE: HBC) would not provide funding for its refund-anticipation loans. American International Group, Inc. (NYSE: AIG) popped 9.3% after it entered into three credit facilities for a total of $4.3 billion designed to allow them to make loans.

Treasurys rose following a successful two-year note auction, which sold at a yield of 0.74%. The benchmark 10-year note rose 0.3125% to yield 3.354%, and the 30-year bond rose 0.7188% to yield 4.426%. The euro rose to $1.3155, up from $1.3116 on Friday.

At the close, the Dow Jones Industrial Average fell 18 points to 11,555, the S&P 500 gained a point at 1,258, and the Nasdaq gained 2 points to 2,667. The NYSE traded just 467 million shares making yesterday the slowest day of the year. And the Nasdaq crossed just 263 million shares. On both exchanges, advancers were ahead of decliners by about 1.3-to-1.

Despite the fierce storm that tore across the eastern Unites States, crude oil for February delivery fell 51 cents to $91 a barrel, and the Energy Select Sector SPDR (NYSE: XLE) fell 24 cents to $67.17. February gold rose $2.40 to $1,382.90, and the PHLX Gold/Silver Sector Index (NASDAQ: XAU) fell 0.76 points to 220.5.

What the Markets Are Saying

How much can be gained by studying the lowest volume day of the year? Well, there are some pearls of wisdom to be gleaned from yesterday’s tape action. The Chinese rate hike, coupled with a lightly staffed financial industry, had all of the ingredients necessary to produce a big low-volume sell-off. And when the Dow opened down by over 50 points, the day traders tightened their seat belts in anticipation of the big crash that never came.

Within 30 minutes of the opening, most of the early losses were erased, and the market spent the remainder of the day in a sleepy retracement that ended with mixed results. So, again, the stock market turned aside from the bad news and rallied — a very good sign for the bulls.

Yesterday, I promised that I’d provide the targets for each of the indices for the current advance. To do this, we must go back to 2008, since it is there that a major support zone was violated as the bear market entered its final plunge.

The Dow Industrials broke support in June 2008, at 11,785, and a mid-August rally failed at that spot, leading to an acceleration in downside volume as the market rolled over. That’s the immediate target and equates to 1,278 for the S&P 500, and 8,365 for the NYSE Composite. The Nasdaq is a bit higher at 2,700 to 2,710.

But the overall target for 2011 is much more aggressive. Assuming that the S&P500 continues to hold above the recent breakout at 1,227, the overall target for 2011 is 1,400. For the Dow, it is 12,800, and for the Nasdaq it is 3,700. Later, I’ll explain how I arrived at those numbers and provide some long-term investment ideas based on ETFs that could make 2011 a big winner for our readers.

For one ETF to buy now, see the Trade of the Day.

Today’s Trading Landscape

To see a list of the companies reporting earnings today, click here.

For a list of this week’s economic reports due out, click here.

If you have questions or comments for Sam Collins, please e-mail him at samailc@cox.net.