A Rest, But An Underlying Bid

A lot of folks have been looking for this market to take a rest, but the buyers are not going away. After a little midday meandering, we had another surge late in the day and kept things close to flat. The fear of missing out is offsetting the fact that we are technically extended, especially with regard to the oscillator.

We didn't have a lot of sector strength today but homebuilders, retailers and pharmaceuticals were in the green. Banks pulled back and energy took a rest, but mostly we just had a lot of flopping around. That actually is a good thing, but we will need more of it to work off some of the recent froth.

In some ways the market is walking the high wire. The rally off the March lows has certainly run big and is a bit old, but you can see the stubbornness of the buyers at this point. Too many folks missed out and now they are trying to catch up. That may ultimately mark a top, but we sure aren't going to rollover easily.

I don't see a good reason to suddenly collapse.

Going into more detail, market participants took profits. Despite optimistic comments from Fed Chairman Bernanke and another dose of better-than-expected economic data, participants opted to take profits rather than extend the prior session's rally... Fed Chairman Bernanke stated in his testimony before the Joint Economic Committee that recent data suggest that the pace of contraction may be slowing, and that economic activity is expected to bottom out, then to turn up later this year... Bernanke's premise seemed to be supported by the April ISM Service Index. Showing continued contraction, the Index came in at 43.7, but that was better than expected and up from the prior reading... Stocks did see a brief flurry of buying as Bernanke's comments and the ISM data hit news wires, but enthusiasm faded and sellers reclaimed control over the session... Sellers focused most of their efforts on financial stocks, which finished 1.2% lower. Still, that decline hardly offsets the 10% rally that financials had made in the prior session... Energy stocks also fell out of favor as crude prices shed 1.2% to close at $53.80 per barrel. That weighed on oil exploration companies, which finished 3.8% lower and dragged the overall energy sector to a 1.3% loss... Materials stocks lagged for much of the session, but pared losses into the close. The sector ended 0.6% lower. Steel stocks (-1.8%) weighed on the sector after AKS cut its outlook... Health care stocks managed to hold up against sellers' efforts by closing 0.8% higher. Health care spent virtually the entire session in the green, thanks to leadership from managed health care (+4.8%) and pharmaceuticals (+1.1%)... Casinos and gaming stocks advanced 10.1% after LVS was upgraded by analysts at Bank of America's Merrill Lynch ahead of the company's earnings report (adj. $0.01 vs. expected $0.02 loss announced after close) and MGM posted better-than-expected earnings...KFT also reported a positive earnings surprise. That helped Kraft advance and provide support to the Dow... Fellow food processor ADM didn't fare as well, though. The company posted disappointing earnings for its fiscal third quarter... Earnings remain in focus tomorrow morning, but most attention will be fixed on the ADP Employment report, which will possibly provide a glimpse into Friday's official jobs report.