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Stocks build gains as U.N. resolution may be delayed

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The major indexes have built gains to their best levels of the session with the Dow Industrials (INDU) 7,721 +2.24% jumping 170 points, the broader S&P 500 (SPX.X) 821 +2.14% gaining 17 points, the narrower S&P 100 Index (OEX.X) 417 +2.09% rising 8.5 points and tech-heavier NASDAQ-100 Index (NDX.X) 1,009 +3.99% rising 39 points and reclaiming the psychological 1,000 level.

Stocks have reached their best levels of the session when news reports began circulating that a U.N. vote on a new Iraq resolution, which had been expected as early as this Thursday, may not occur until next week.

As stocks rise here in the U.S., the European markets, which were pummeled lower yesterday recouped their losses and then some with France's CAC 40 rising 151 points, or 6.3%, Germany's DAX gaining 134 points (+6.12%) and the United Kingdom's FTSE 100 surging 199 points (+6.08%). Smaller exchanges in European markets saw the Belgium BEL-20 jump 9.78% and the Netherland's AEX General catapult high by 9.98% on thoughts that a war with Iraq may be delayed.

Here in the U.S., the Semiconductor Index (SOX.X) 303.76 +5.68% has now regained its psychological 300 level despite a morning downgrade from Needham on semi-equipment names Applied Materials (NASDAQ:AMAT) $12.30 +4.6%, Novellus (NASDAQ:NVLS) $26.87 +3.46% and KLA-Tencor (NASDAQ:KLAC) $34.62 +3.06% to "hold" from "buy", saying that their channel checks indicate that industry fundamentals may soften further, resulting in potentially flat to down orders for calendar Q2 and Q3.

Today's upside action in the major indexes is coming on a pickup in volume when compared to yesterday's rebound, which began at approximately 01:30 PM EST. Current volume has the NYSE pressing 877 million shares (yesterday at this time was 762 mill.), while NASDAQ volume is heavy at 923 million shares (767 yesterday at 01:00).

Not surprising, market breadth is positive with NYSE showing gainers outnumbering decliners by a 7 to 3 margin, while NASDAQ breadth is positive at 2 to 1.

The number of stocks having traded a new 52-week low has abated, but this indicator of breadth leadership remains somewhat negative with the NYSE reporting 29 stocks having traded a new 52-week high compared to 69 stocks having traded a new 52-week low. NASDAQ has 30 stocks trading new 52-week highs, compared to 51 stocks trading new lows. While today's session is quite strong for the major indexes, as each hour passes, the number of new 52-week lows has been slowly increasing at a slightly larger margin on an hour-by-hour basis than the number of new highs.

This observation may have aggressive bulls that played some short-term upside moves, monitoring the S&P 100 Index (OEX.X) 418 +2.23% closely as it approaches its WEEKLY pivot of 420 here.

We've seen a very strong round of selling in the Treasury market today, with YIELDS jumping higher. The benchmark 10-year YIELD ($TNX.X) 3.714% has now traded well above it WEEKLY pivot of 3.695%, and despite this morning's somewhat weaker than expected economic data, certainly shows some asset allocation away from bonds toward equities has taken place, and may stay in equities for at least a weak or so, and may be "time lined" against a delayed U.N. vote on Iraq.

Jeff Bailey

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