The Dow turned higher Tuesday after the latest Fed minutes were released. Banks and some techs were higher, while retail and homebuilder stocks were weak.
The Dow rebounded into positive territory after a wobbly morning and after flirting with 11,000in the previous session. The S&P 500and Nasdaqwere also higher.
Although we may reach the 11,000 level within the week, it will likely drop to 10,000 first, said Jeffrey Kleintop, chief market strategist at LPL Financial.
"The momentum is fading in this rally and if we hit 11,000, the market is due for another 5 to 10 percent pullback," Klientop said.
In the minutes of the last Fed meeting, most members seemed to agree that conditions "were likely to warrant exceptionally low levels of the federal funds rate for an extended period." but there was one member that said "communicating such an expectation would create conditions that could lead to financial imbalances."
Perhaps the most interesting part of the statement was that "such forward guidance would not limit the Committee's ability to commence monetary policy tightening promptlyif evidence suggested that economic activity was accelerating markedly or underlying inflation was rising notably."
Earlier, Richmond Fed President Jeffrey Lacker told CNBC that he is becoming less comfortable with the Fed's language promising to keeping interest rates low for an extended period and would favor changing it shortlybefore the Fed raised rates.
"The risk going forward in this expansion is going to be a little more tilted towards waiting too long, and I'm going to be pretty vigilant about that," said Lacker.
A rate hike is in the cards later this year, said Kleintop, adding that the Fed is expected to "test some of the extended-period language" in April.
"Odds favor that they modify that language in some way," said Kleintop. "And the market is going to have the very typical reaction that will send them lower."
Treasury prices pared gains after solid demand for the latest three-year auction. The $40 billion sale fetched a high yield of 1.775 percent and the bid-to-cover ratio was 3.10.
Auctions of 10-year notes and 30-year bonds are expected in the next two days respectively.
Greece was reportedly seeking to change its bailout agreement but a top finance-ministry official swatted down such rumors. Meanwhile, Greece is now looking to U.S. investors with a multibillion-dollar bond issue here in a few weeks and is, charmingly, billing itself as an emerging market.
The dollarrose amid a selloff in the euro as investors worried about debt problems in Greece and elsewhere. Oil rose near $87 a barrel to a fresh 18-month high and goldhit a four-week high.
Alcoa and JPMorgan were among the top Dow gainers.
Banks also advanced after a pair of analyst upgrades on the sector.
Wells Fargo raised its ratings on the sector to "market overweight," saying it thinks Bank of America and PNC Financial were among the best positioned.
JPMorgan also raised its rating on U.S. banks, to "market weight" from "overweight."
Bank of America was among the handful of gainers on the Dow, along with DuPont after Bank of America/Merrill Lynch raised its rating on the stock to "neutral" from "underperform."
Shares of regional banks such as Regions Financial , Zions Bancorp and Fifth Third rose as the commercial real estate market showed signs of thawing.
AT&T fell amid news that the company plans to spend $1 billionto upgrade its network.
Microsoft shares skidded amid buzz that the company is preparing to announce its long-awaited "Project Pink" phones aimed at the youth marketearly next week. Little is known about the phones except that they will include social networking capabilities and will be sold by Verizon . It is thought they may be an updated version of the Sidekick.
Apple rose despite slightly disappointing early iPad sales results — 300,000 sold on the first day, compared with expectations of 400,000 to 500,000.
The iPad gave a boost to another stock: Netflix shares continued to rise, after hitting a 52-week high on Monday, as it's one of the most popular apps on Apple's new iPad.
Amazon.com shares jumped despite news that the iPad may take share from the Kindle, the current leading e-reader device.
Shares of BlackBerry maker Research In Motion rose after taking a beating in recent sessions.
Meanwhile, U.S. shares of Nokia fell after the Finnish wireless-device maker said it is working on producing its own Internet tablet, scheduled to reach stores later this year.
Homebuilders skidded after Credit Suisse downgraded its rating on KB Home and NVR , saying, "We are shifting to a neutral stance on the builders, as we think that much of the 'spring trade' has played out and we expect a slowing in housing demand after the April 30th expiration of the homebuyer tax credit."
Pulte Homes was among the hardest hit in the sector after Stifel Nicolaus initiated coverage with a "sell" rating.
Meanwhile, a recent Fannie Mae survey showed nearly two-thirds of Americans think the time is right to buy a house, with a majority believing prices will be the same or higher over the next year. But most said that it would be tougher for them to get a loan than it was for their parents.
Massey Energy shares tumbled following news of amassive explosion at one of its West Virginia mines that left 25 coal miners dead and four missing.
On the M&A front, Peabody Energy raised its offer for Australia's Macarthur Coal to $3.27 billion. However, analysts suggest the bidding could go even higher, as the new bid is below Macarthur's current market price.
TUESDAY: Fed's Kocherlakota speaks; 3-year auction; Fed minutes
WEDNESDAY: Weekly mortgage apps; weekly crude inventories; Fed's Dudley, Hoenig speak; 10-year auction; consumer credit; Earnings from Family Dollar, Bed, Bath & Beyond
THURSDAY: BOE, ECB announcements; weekly jobless claims; Fed's Kocherlakota speaks; 30-year auction; Earnings from Pier 1, Chevron (interim results)
FRIDAY: Wholesale trade
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