With financial-market optimists taking two out of three falls from pessimists so far in 2011, it seems safe to say the rally is still on.
Stocks bounced back on Wednesday, posting modest gains that were built early in the session and sustained until the closing bell.
The Dow Jones Industrial Average closed to a new two-year high at 11,723, adding 32 points, or 0.3%. The gains by the Nasdaq and S&P 500 were even more impressive, each adding 0.8% and 0.5%, respectively.
The market’s four-month rally continues to flex its muscles — the S&P 500 is now up nearly 22% since early September.
Strength was seen among homebuilding and construction stocks (on no particular relevant data point), as well as snapbacks by regional and commercial banks, which had sold off on Tuesday.
Laggards came from both defensive plays, like consumer non-cyclicals and commodities and basic materials stocks, the latter of which had been one of the market’s recent stars. Coca-Cola (NYSE:KO) and Procter & Gamble (NYSE:PG) finished slightly lower, while the parabolic rise in the Market Vectors Rare Earth/Strategic Metals ETF (NYSE:REMX), has finally cooled off — the fund has lost nearly 10% since a peak of $27.19 early in Tuesday’s session.
Most commodities, including oil, finished modestly higher, although 2010 all-stars gold and silver also were off their game, in a similar fadeout that began early Tuesday from a level that now looks like a near-term technical ceiling for both metals.
The fighting spirit in Wednesday’s market was apparent within the session’s first hour — investors woke up to a somber mood at the European bourses, which were mostly lower while digesting the day’s previous selloff in commodities and basic materials in U.S. markets.
However, the mood among U.S. traders seemed to lift with the release of the ADP employment report for December, which found 300,000 jobs were added to private payrolls. The number was nearly three times what Wall Street had expected, and it likely boosted confidence that Friday’s jobs report will be positive news.
Skeptics pointed to the heavy services-job component of the gain, suggesting that strong holiday hiring may have provided the lift — one that can’t necessarily be counted on to continue.
But today, like most of the days since Nov. 30 that have seen an 8% rise in stocks, was not about data or fundamental analysis. It’s still about momentum, and its current strength isn’t to be trifled with.
