Higher Hurdles for Stocks

With a dozen trading days left in the year, stocks pushed ahead to 14-month highs on Monday. Though the markets were relatively calm, there seemed to be an absence of both fear and sellers, especially after the government of Abu Dhabi rescued the failing ventures in neighboring Dubai with $10 billion in emergency assistance, as $3 billion in notes came due today.

The Middle East bailout spurred more dollar weakness, which translated into higher stock prices on the US exchanges. The Dow, in particular, lagged the other indices due to a pre-market announcement of oil conglomerate ExxonMobil's (XOM) $41 billion bid to purchase XTO Energy (XTO), primarily for it's natural gas business. The all-stock deal pushed shares of XOM down more than 4% on the session. Of the 30 Dow stocks, XOM was easily the biggest loser, as 25 stocks posted gains.

All of the major indices made year-to-date and 12-14-month highs, including the Dow Transportation Index, which confirmed the move in the Dow. Despite stocks breaking out to new highs, there was no lack of appetite for stock buyers and no sellers anywhere in sight. The Dow has closed higher six of the past seven sessions. Market sentiment is about as bullish as it can get.

Dow 10,501.05, +29.55 (0.28%)
NASDAQ 2,212.10, +21.79 (0.99%)
S&P 500 1,114.11, +7.70 (0.70%)
NYSE Composite 7,186.49, +61.37 (0.86%

Simple indicators were decidedly one-sided, as advancers trounced decliners, 4689-1868. New highs led new lows, 509-70, despite low volume and end-of-year tax issues.

NYSE Volume 5,059,216,500
NASDAQ Volume 1,855,139,750

Oil fell for the 9th day in a row, losing 36 cents, to $69.51. The metals were slightly on the upside, with gold higher by $3.80, to $1,123.80, and silver gaining 25 cents, to $17.34.

There was barely any concern over the upcoming Fed announcement on Wednesday. Traders are convinced that the Fed will do nothing in terms of rate policy though there are rumblings that some of the critical wording in their accompanying statement may begin to indicate a less accommodative stance.

Looking over the economic horizon, the week is full of reports, including PPI, Capacity Utilization and Industrial Production on Tuesday, and CPI, Housing Starts and Current Account Balance all due on Wednesday in advance of the Fed statement.

Unless those economic reports are dazzlers or the Fed changes some of the crucial wording (especially the term "extended period" in relation to how long they expect to keep rates low) in their statement, it looks like smooth sailing for stocks through the end of the year. It's difficult to argue that point being that 2009 will go down in market history as one of the best ever for stocks.

Although some analysts say that stocks are pricey right now, it doesn't seem to be bothering those still participating in one of the market's greatest bull rallies.