Stocks Unexpectedly Higher on Short Covering

Somebody pulled the "buy" switch on Wall Street, or, perhaps more to the point, shorts got caught with their pants down, as stocks staged the strongest rally since June 1, with the Dow up 172 points and the other major indices tagging along with similarly-sized gains.

There was no real news to serve as a catalyst, though after taking losses over the past two weeks, investors may have been looking for bargains and their buying may have initiated a temporary short squeeze, as just about everybody on the planet is aware of the topping out which occurred the second week of June.

Dow 8,472.40, +172.54 (2.08%)
NASDAQ 1,829.54, +37.20 (2.08%)
S&P 500 920.26, +19.32 (2.14%)
NYSE Composite 5,911.03, +115.31 (1.99%)

Advancing issues finished well ahead of decliners, 5191-1273, and new highs took a slim edge over new lows, 61-60, ending a nine-day run in which lows led. Volume was only marginally higher than in recent sessions, another hint that the move could have been based on a short squeeze.

NYSE Volume 1,177,536,000
NASDAQ Volume 2,247,375,000

Crude oil was up $1.56, to $70.23. Gold was also up $5.10, to $939.50. Silver added 9 cents, closing at $14.03.

Thursday's action certainly looks like the garden variety snap-back rally made on the backs of short-sellers, who must be in abundance at this juncture. It will be interesting to see whether the rally has any legs as the week comes to an end.