Rally Led By Financials, Airline and Defense Stocks

Finally, an oversold rally; the Dow moved 225 points the last 90 minutes. It was the first close at the highs for the year; financials led, but beaten up groups like airlines also posted a nice rally. Defense stocks rallied as well.

After the close:

--Alcoa flat after reporting earnings a couple pennies above expectations; no guidance.
--Men's Wearhouse down 14 percent as they cut their guidance for 2007 (year ends at end of January).
--American Eagle lowered guidance for the quarter, but the stock is up.
--Morton’s Steakhouse also giving poor guidance; down 5 percent.


--December same store sales, and traders are not optimistic (see Men's Warehouse above);
--Bernanke speaks, and traders want a 50 basis point cut in Fed Funds rates right now (before the Jan. 30 meeting). Of course he won't say that, so most don't expect much from him.

Bottom line: sentiment is still negative, but we are so oversold that and any kind of positive signs from those two data points will move markets up.

Where are we?: (percentage from 2007 highs)

Dow Industrials down 10.5 percent
S&P 500 down 10.4 percent
Nasdaq down 14.0 percent
Russell 2000 down 17.5 percent

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