Stock Market Update - Wed Sep 19 12:00:01 EDT 2007

[BRIEFING.COM] The rate cut enthusiasm that drove the major indices sharply higher yesterday hasn't faded today.  Granted the gains aren't as big, but the follow-through interest is significant.

To this point there hasn't been any real inclination to sell into the strength.   Anecdotally, that suggests participants are feeling good about the Fed's aggressive action and its ability to forestall the adverse economic effects that might arise from the disruption in the financial markets.

That optimism can be spotted in the performance of the S&P sectors today, as those areas with close ties to the economy comprise today's leadership. 

The materials sector (+2.0%) leads the way in terms of percentage gains, but it is the financial sector (+0.8%) that carries the most weight in terms of influence on the broader market.  Energy (+0.8%) and consumer discretionary (+1.0%) are other sectors of influence that are moving higher.

The energy sector's strength fits with the improved growth outlook that has followed the rate cut and it has also been driven by the uptick in crude prices. 

Earlier today crude futures for October delivery topped $82 per barrel, hitting a high point of $82.51 right around the time the Dept. of Energy reported a 3.87 million barrel drawdown in crude stockpiles.  Analysts had been expecting a draw of just 2.025 million barrels according to a Bloomberg survey.

Oil prices have fallen off today's best levels (-$0.03 to $81.48) as the bullish report had been discounted in recent action.

Nonetheless, the trend in oil prices, along with the weakening dollar and the lower fed fuds rate, has stoked some inflation concerns that have clipped the Treasury market.  The 10-year note is down 19 ticks in today's trading, bringing its yield up to 4.55%.

Shares of Morgan Stanley (MS 66.66, -1.85) are getting clippd today, too, after the investment bank posted a third quarter profit of $1.38 per share that was $0.16 shy of the consensus estimate.  The disappointment was already priced in for the most part, but today's news has provided a profit-taking excuse following yesterday's 5.5% gain in the stock.

The feeling that the market is getting a bit overbought on a short-term basis could invite some afternoon selling interest.  In terms of the morning trade, though, it was pretty much a one-way street with buyers driving the action.

NYSE Adv/Dec 2395/822...Nasdaq Adv/Dec 1991/852