Market Moves With Spike In Financials - Particularly BAC

After struggling last week, the bulls regained their footing and had the bears on the run all day. There was a little selling following the initial gap up open this morning, but the bulls shook it off and were able to trend up all day. The bears could not dig their claws in and just gave up completely in the final minutes as news hit that GS, JPM and MS are looking to repay a total of $45 billion in TARP funds.

Breadth was strong all day, but volume was quite light. It is pretty obvious that some folks were caught off guard by the strength after the poor action we had last week. The light volume makes the move suspect, but obviously that does not prevent shorts from being squeezed.

I was not expecting this market to stay as strong as it was. It certainly felt like a squeeze, but the bulls did not relent, and they regained the upper hand. There never was any serious technical breakdown last week, so they do deserve the benefit of the doubt. It was just a bit surprising that they recovered so quickly today on no real news.

The ease with which we shook off the breakdown we suffered last week shows how strong the underlying support is and how anxious folks are not to be left out once again of further upside. However, this was a pretty classic low-volume bounce back to resistance, and it is very tough to trust in further upside. If you have a lot of longs, I'd consider some hedges, but there certainly is some strong momentum in individual stocks, and that isn't something you want to fight.

Going into more detail, stocks closed at session highs as diversified bank stocks and financial services stocks steadily led the broader market to its best single-session percentage advance in nearly two weeks... BAC was a primary leader among financials after reports indicated that analysts at Goldman Sachs added shares of BAC to their Conviction Buy List. Even in the face of persistent capital concerns, regional banks jumped 7.1%, diversified banks finished 8.5% higher, and diversified financial services companies advanced 7.6%. The KBW Banking index climbed 7.5%... Strength in bank stocks led the financial sector to a 7.2% gain, and helped carry the S&P 500 back above 900 as the broader market's advancing issues outnumbered its decliners by 10-to-1... The positive bias also helped pare losses in the utilities sector, which looked as if it would close lower for its fourth straight session. Instead, utilities finished flat... Buyers favored cyclical stocks for most of the session, bidding materials stocks (+3.6%), industrial stocks (+3.2%), and shares of retailers (+4.5%) higher. Retailers received added support after better-than-expected top and bottom line quarterly results and an upbeat earnings outlook from home improvement outfit LOW helped home improvement retailers tack on 7.0%... Home improvement retailers will likely have their gains tested Tuesday as April housing starts and building permits data hits news wires (8:30 AM ET). No other economic data is scheduled for release ahead of tomorrow morning's opening bell... According to Reuters, M was added to the Conviction Buy List at Goldman Sachs, winning additional favor for retailers. Reuters also reported that Goldman cut its rating on JWN, but shares of JWN were able to overcome sellers' initial efforts and close higher with its peers... Energy stocks (+3.1%) climbed as crude oil futures rallied 4.8% to settle pit trading just above $59 per barrel at a six-month closing high... Precious metals fell out of favor, though, as equities bounded in broad-based fashion. Gold prices settled 1.0% lower at $921.70 per ounce, while silver slipped 1.3% to settle the session at $13.93 per ounce... Also a defensive benchmark, the 10-year Treasury Note dropped 23 ticks, lifting its yield to roughly 3.22%... Trading volume during the session was rather low, however. Roughly 1.4 billion shares traded hands on the NYSE.