It's Not Just Buying; It's Also Short Covering

Stocks rocketed higher today after a very good second quarter report from INTC. The bullishness generated from INTC helped the S&P 500 and the Dow log their third straight gain and gave the Nasdaq its fourth consecutive finish in higher ground. The major equity averages spent the entire session ascending steadily before finishing with some of their best gains in the last few months...

The positive tone was actually set after the previous session's close when INTC announced better-than-expected adjusted earnings of $0.18 per share in its latest quarter, thanks partly to fatter profit margins. The company went on to issue an upside revenue forecast for the third quarter... Intel was able to lead the tech sector to a 4.2% gain, which was more than any other sector. Perhaps more importantly, Intel encouraged buying in the broader market. In turn, more than 95% of the companies in the S&P 500 finished higher, while MCD was the only company in the 30-member Dow Jones Industrial Average to finish lower. AXP was a primary leader in the Dow after the company posted better-than-expected trust data...

Strength in AmEx and other financial issues helped send the financial sector 4.1% higher. Financials proved to be a leader for the broader market, a position that was reclaimed earlier this week amid positive analyst comments about the short-term prospects of banks. Financials are currently up more than 10% week-to-date... Renewed strength among financials has helped carry the broader market. Week-to-date, the Dow and the S&P 500 up 5.8% and 6.1%, respectively, while the Nasdaq is up 6.1% this week. That helped all three major indices close above their 50-day moving averages. What's more, should the gains hold, stocks will log their best weekly performance since March...

Health care stocks have spent the week trading as laggards. They managed to advance 0.8% this session, but are up 2.7% for the week. ABT weighed on the sector as investors reacted negatively to the company's in-line earnings and forecast in the latest round of trading...

Trading volume came in near longer term averages by hitting almost 1.4 billion shares on the NYSE. Still, more recent levels have been unimpressive. That often signals a lack of conviction. However, many participants are likely waiting to see if earnings announcements continue to top expectations. Banking giant JPM is scheduled to report tomorrow morning before the opening bell. BAC and GE are all scheduled for Friday morning...

Market participants will likely be looking for encouraging guidance from major industry players. Optimistic forecasts would complement economic reports that suggest economic conditions are bottoming and even showing signs of improving...

Manufacturing activity in the New York area declined a fractionally in July; the Empire State Manufacturing Index came in at a better-than-expected 0.55, which is the best reading since April 2008...However, a 0.4% drop in June industrial production meant that production has fallen in 17 out of 18 months. Still, the decline was less than expected and the softest downturn since a positive reading in October 2008... Meanwhile, capacity utilization was in-line at 68%... The Consumer Price Index, a widely-watched inflationary gauge, showed a sharper-than-expected increase for June by coming in with a 0.7% increase. That is the sharpest increase since July 2008. However, core prices increased 0.2%, which is more in-line with recent trends, even if it was slightly above what had been expected...

long AAPL/BAC