First Japan, Then WFC

Although plenty of traders out there were looking for a relatively quiet day ahead of the long weekend, some surprising news out of Japan last night set an early positive tone, and a upward guidance revision from WFC really got things going. After running higher for the first 30 minutes of the day, the broader market essentially flat-lined for the rest of the morning and most of the afternoon, with some mild swings in the defensive sectors dictating much of the action in the indices. However, a late squeeze in the financials helped push the market to fresh highs, with the S&P 500 crossing the psychologically important 850 level.

In the end, the indices were able to close out the day at highs with average gains of 3.5% on breadth that was 5:1 to the positive. Again, a bout of late-day buying really underpinned the notion that the big money is looking for ways to put their capital to work, and the strong volume we saw today only reinforces that.

The Dow moved back above 8,000. The WFC announcement gave investors confidence in other bank stocks... There have been some reports indicating that banks and other financial companies may be in need of more capital, but that didn't disrupt a 8.9% advance by financials. The gain is providing leadership to the broader market as many investors hold to the notion that a broader market recovery will come on the back of a rally in financials... Retailers also made strong gains this session. Though many companies reported negative same-store sales results for March, the numbers weren't necessarily as bad as many had expected. That has helped support the belief that there won't be material deterioration in the immediate offing... For instance, JCP reported a 10.6% decline in March same-store sales, but raised its guidance for the first quarter... Retail giant Wal-Mart actually reported an increase in March same-store sales, but the increase was short of expectations. That has overshadowed an in-line earnings outlook from the company and led to weakness in its stock... Nonetheless, retailers remain challenged by stiff consumer headwinds, primarily a weak job market. Initial jobless claims for the week ending April 4 totaled 654,000, which is down 20,000 from the week before, and slightly below the 660,000 initial claims that were expected. Continuing claims climbed to a new record high. Weekly claims were generally in-line with expectations, and down a bit from the prior weak... In other economic news, February trade deficit totaled $26.0 billion, which is less than the $36.0 billion deficit that was widely expected, and down from January's deficit of $36.2 billion... Import prices for March increased 0.5% month-over-month and decreased 14.9% year-over-year.

Moreover, the market never came in, except for the defensive stocks that are now being jettisoned like they have terminal diseases. People don't even want to hear about the past.

Irrational?

Nah, just what happens when big money is caught leaning the wrong way, and are people ever leaning the wrong way.

I can't believe that this market is willing to embrace companies that are quite simply doing horribly, like the natural gas companies or retailers that are simply not going to do as horribly as we thought. But that's what happens at the bottom. The toughest thing to do, the most disciplined thing to do, is to suspend current fundamental discipline and think what a turn in WFC might mean for this market: housing bottom, refinancing boom, retail and restaurant sales better, stimulus coming.

In other words, just really hard to stay short. When you layer in a possible TXT bid on top of the PHM bid, you have a lot to like.

Best of all, you have the delicious irony of Moody's downgrading Berkshire Hathaway on the first day when Berkshire actually makes sense to buy because of its gigantic exposure to Wells Fargo....