Federal Reserve Chairman Ben Bernanke told Congress yesterday that the recent hike in the discount rate is not a signal that other rates will be raised. The chairman said that he expects the economy to maintain a moderate pace of recovery and that inflation is expected to remain subdued. He cautioned, however, that at some point the Fed will need to tighten monetary conditions in order to prevent inflation.

His remarks seemed to be exactly what investors wanted to hear. And despite a report that new home sales fell 11.2% month-over-month, the market focused solely on the Fed chairman’s report, ignoring the fact that the home sales data was the worst since January 2009.

Financial stocks scored as the strongest group, up 1.7%%, with consumer discretionary up 1.3%, and technology stocks up 1.1%. The U.S. dollar fell against the euro and the yen, and futures were generally higher.

At the close, the Dow Jones Industrial Average (DJI) was up 92 points to 10,374, the S&P 500 (SPX) gained 11 points to 1,105, and the Nasdaq (NASD) gained 22 points to 2,236. 

Volume was again light with just 1 billion shares trading on the NYSE, but breadth was at a positive 11-to-4. On the Nasdaq, 627 million shares were traded and advancers were ahead by 8-to-5.

March crude oil rose $1.14 to $80 a barrel, and the Energy Select Sector SPDR (XLE) gained 35 cents, closing at $55.98. 

April gold fell $6, settling at $1,097.20 an ounce, and the PHLX Gold/Silver Sector Index (XAU) fell 1.04 points to 155.42.

What the Markets Are Saying

The market rallied yesterday despite bad news from the housing market, buoyed by the testimony of the Fed chairman. That’s the good news/bad news of yesterday. But on balance, even though the Dow made back a substantial portion of Tuesday’s losses, it did not fully erase the losses of the prior two days, neither did it push any of the most important indices above their critical first items of resistance, namely their 50-day moving averages.

In fact, the internal indicators of each of these indices received sell signals from their respective slow stochastics, and only a very mild and meaningless bounce from their Moving Average Convergence/Divergence (MACD) indicators. And for such a heralded appearance by the chairman, investors should have expected more volume than 1 billion on the NYSE and better breadth, too.

Yesterday’s unenthusiastic rally must be viewed as no more than another feeble attempt to surmount the resistance that is becoming stronger with each day that buyers remain absent.

Today’s Trading Landscape

Earnings to be reported before the opening include: ACI Worldwide, AMAG Pharmaceuticals, AMBAC Financial, America’s Car-Mart, ANSYS, Aqua America, Ares Capital, Ariad Pharmaceuticals, Asbury Automotive, Asset Acceptance Capital, Berry Petroleum, Biovail, Blackstone, Bruker Corp., Cablevision, CapitalSource, Carter Holdings, CenturyTel, Cinemark, Coeur d’Alene Mines, Cogent Communications, Continental Resources, Deutsche Telekom, Digital Realty Trust, Dr. Pepper Snapple, Dril-Quip, Dynegy, EMC Insurance Group, EMCOR Group, EnsCo, Exterran Holdings, First American, Fortress Investment, Foster Wheeler, Frontier Oil, Genesis Lease, Gerdau AmeriSteel, Gulfmark Offshore, HJ Heinz, Holly, Hyatt Hotels, i2 Tech, ICON plc, I-Flow, Iowa Telecom, Iron Mountain, ISIS Pharmaceuticals, Kaydon, KBR, King Pharmaceuticals, Kohl’s, Lamar Advertising, Linn Energy, LKQ Corp., MacQuarie Infrastructure, Magna, Mariner Energy, MetroPCS, MPS Group, Mylan Labs, Newmont Mining, NII Holdings, NorthStar Realty, Northwest Pipe, Olympic Steel, OM Group, Omnicare, Pain Therapeutics, Parker Drilling, Plains Exploration, PLATO Learning, Portland General Electric, Reliant Energy, Revlon, Safeway, Sempra Energy, Sirius XM Radio, Smart Balance, Sourcefire, SPX Corp., Stealthgas, Stereotaxis, Steven Madden, Sycamore, Symmetry Medical, T-3 Energy Services, Telephone & Data, The Inventure Group, Tim Hortons, TRW Automotive, US Cellular, VanceInfo Technologies, W&T Offshore and Warnaco Group.

Earnings to be reported after the close: Alnylam Pharmaceuticals, Assured Guaranty, AthenaHealth, Bare Escentuals, Buenaventura SA, Cache, CEC Entertainment, Chemspec International, Cleco Corp., Cogdell Spencer, Cogent, Copano Energy, Crocs, Deckers Outdoor, Dresser-Rand, DryShips, Einstein Noah Restaurant Group, eResearch Technology, Esterline Technologies, Fluor, Gap, Genoptix, Geron, Great Plains Energy, Hansen Natural, Human Genome, Insituform Technologies, Integrys Energy, Kinder Morgan Management, LaSalle Hotel Properties, Leap Wireless, Live Nation Entertainment, Maxygen, Mohawk Industries, Monarch Casino & Resort, Navigators Group, Novatel Wireless, Novell, Ntelos Holdings, NuVasive, OmniVision Technologies, Online Resources, PS Business Parks, Rosetta Stone, SandRidge Energy, Savient Pharmaceuticals, SBA Communications, Sotheby’s, SureWest Communications, SW Energy, TAL International, Titanium Metals, Tween Brands, Universal Health Services, Universal Truckload Services, U-Store-It, Volcom, Weight Watchers, Westar Energy, World Fuel Services and Wynn Resorts.

Economic reports due: durable goods (the consensus expects 1.5%), jobless claims (the consensus expects 460,000), FHFA house price index, EIA natural gas report, Fed balance sheet and money supply.

Late news: Coca-Cola Co. (KO) unveils deal to buy the majority of bottler Coca-Cola Enterprises.

Quarterly earnings news (earnings vs. estimated):

• Aqua America (WTR): 20 cents vs. 20 cents
• Biovail (BVF): 56 cents vs. 37 cents
• CapitalSource (CSE): 76 cents vs. 31 cents
• Carter Holdings (CRI): 61 cents vs. 56 cents
• Cinemark (CNK): 36 cents vs. 19 cents
• Continental Resources (CLR): 29 cents vs. 30 cents
• Dynegy (DYN): 47 cents vs. 12 cents
• Ensco (ESV): $1.24 vs. $1.23
• Fortress Invest (FIG): 58 cents vs. 8 cents
• Foster Wheeler (FWLT): 67 cents vs. 65 cents
• Gulfmark Offshore (GLF): 15 cents vs. 43 cents
• Iron Mountain (IRM): 27 cents vs. 24 cents
• KBR Inc. (KBR): 45 cents vs. 39 cents
• King Pharmaceuticals (KG): 23 cents vs. 24 cents
• Kohl’s (KSS): $1.40 vs. $1.37
• Magna (MGA): 5 cents vs. 82 cents
• Metro PCS (PCS): 9 cents vs. 6 cents
• Mylan Labs (MYL): 33 cents vs. 30 cents
• Newmont Mining (NEM): $1.13 vs. 79 cents
• Portland General Electric Co. (POR): 11 cents vs. 19 cents
• S&P 500 (SPX): $1.35 vs. $1.32
• VanceInfo Technologies (VIT): 16 cents vs. 14 cents
• W&T Offshore (WTI): 36 cents vs. 20 cents

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