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Wednesday Look Ahead: Wall Street's Stealth Rally Making Strides

The stealth rally is getting noticed.

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AP

Stocks Tuesday broke out of their slow drift, as the Dow had its best day since March 5, gaining 103 points to 10,888. The S&P 500 was up 8 to 1174, its highest close since Sept. 26, 2008. For the month, the S&P is up 6.3 percent, and the Dow has gained 5.5 percent.

Dovish cooing from San Francisco Fed President Janet Yellen, nominee for Fed vice chair, helped seal the triple digit gain on the Dow. Yellen, speaking in the final hour of trading, said she fears high unemployment for years and said the Fed was right to retain its statement that it will keep rates low for an "extended period."

The market has rallied despite a chorus of naysayers who think the 70 percent bounce off the March, 2009 low is overdone. Traders say the market may ease higher into the end of the quarter, as money managers adjust their portfolios and investors hold onto gains.

"You make money by listening to the market," said strategist Laszlo Birinyi. "I've advised people to cut down on their reading."

Birinyi, on "The Kudlow Report," said he's holding onto his positions, but he's now a bit concerned about some long time bears warming up to the market. He said there are some technicians who after a 60 percent move, now believe the market has crossed an important level that justifies jumping in. "I'm seeing a little bit of capitulation among the bears," he said.

What to Watch

Wednesday's data includes durable goods for February at 8:30 a.m. and new home sales, at 10 a.m. There is also the auction of $42 billion in 5-year notes.

The 10-year Treasury was lower Tuesday, pushing its yield up to 3.680 percent. The 2-year was unchanged, after the Treasury's $44 billion auction of 2-year notes. There was $11 billion in corporate issuance Tuesday, as spreads continued to narrow.

The bond market was buzzing as the 10-year swap spread turned negative for the first time, as investors continued to pile into higher yielding corporate bonds. Some traders blamed the move on hedging of the new corporates. A negative swap rate means the 10-year Treasury rate was higher than the swaps rate. In this case, 10-year swaps were at 3.66 while the comparable Treasury was at 3.68, said Andy Brenner of Guggenheim Securities.

Brenner said in some ways, the lack of a normal mortgage market has added to the problem.

"You have the mortgage players of the last 20 years buying corporates. Corporates are very expensive. You don't have the natural things going on. It's quarter end and you're going to have some balance sheet issues," said Brenner, head of global emerging markets.

The U.K. budget is unveiled ahead of the New York open.

The House Ways and Means Committee holds a 10 a.m. hearing on China's foreign exchange policy.

The U.S. Chamber of Commerce holds its Capital Markets Summit.

The wireless industry continues to gather at its annual CTIA show in Las Vegas.

General Mills and Paychex report earnings.

Questions? Comments? Email us at marketinsider@cnbc.com