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Daily Blog -03/10/09- 1:37 P.M.

NASDAQ up 6% and S&P surging 5.5%

The U.S. markets are seeing a very widespread rally with several factors as potential catalysts. A lot of traders, while happy to see some market strength, don't expect this rally to last since the sudden spike this morning looks like another round of short covering. Fueling the surge higher were positive comments from Citigroup, some comments from Fed Chairman Ben Bernanke, and comments from Congressman Barney Frank.

The rally started overseas. The Japanese NIKKEI didn't fare so well and closed down 0.4% but its Chinese rivals did well. The Shanghai Composite rallied 1.88% and the Hong Kong Hang Seng surged more than 3%. The rally continued when it hit Europe. One of London's biggest banks, Barclays (BCS) was upgraded today by Credit Suisse and shares of BCS surged 15%. In Germany carmaker Daimler (DAI) was upgraded and the stock is up 13%. Overall the entire European continent saw its varied stock markets close higher. The British FTSE rose 4.8%. The German DAX rose 5.2%. The French CAC 40 rallied 5.7%.

Here in the states the banking stocks are leading the rally. The BIX and BKX banking indices are up 12% and 11.8% respectively. Citigroup was the big headliner in the group. This morning Citigroup CEO Vikram Pandit sent out a letter to his employees that said the company was doing well. Pandit disclosed that Citigroup was profitable during the first two months of this year and felt that the stock price did not reflect the company's "strong" position. Here's an excerpt of his letter to employees:

"Despite the steps we've taken to strengthen our capital base, I am, like you, disappointed with our current stock price and the broad-based misperceptions about our company and its financial position. I don't believe it reflects the strengths of Citi; our newly strengthened capital base, our unique global franchise and most importantly, the quality of our people. These are unprecedented times in the markets, but over time, the markets will recognize the many strengths of Citi." Shares of Citigroup (C) gapped open higher at $1.24 and are currently trading at $1.37 for a +30% gain on the day. Rival BAC is up +25% to $4.70. JPM is up +19% to $18.93. WFC is up 14.8% to $11.45.

The rally or oversold bounce today is extremely widespread and only oil and gold are trading lower. Oil was up earlier in the session and trading above $48 a barrel but the commodity has seen a reversal. The USO is now down 0.6% to $28.48. Meanwhile investors are selling gold to put the money into stocks. The GLD is off 2.6% and trading under $90 and breaking down through the bottom of its bullish channel and falling under technical support at its 50-dma. This is a very bearish move for gold as the channel marked a four-month up trend.

Here's a list of the sector moves:

DDX disk drives... +9.7%
INX Internet...... +5.7%
SOX semiconductors +7.1%
NWX networking.... +6.3%

BKX banking....... +11.8%
BIX banking....... +12.5%
XBD broker-dealers +11.6%

BTK biotech....... +4.1%
DRG drug.......... +2.4%

OIX oil index..... +5.7%
OSX oil services.. +6.8%
XNG natural gas4.. +5.2%

DFI defense....... +3.5%
XAL airlines...... +6.2%
DJUSRR railroads4. +5.5%
TRAN Transports4.. +5.7%
CYC cyclicals..... +7.3%

DJUSCA casinos..... +15.9%
RLX retailers......  +7.0%
DJUSHB homebuilders +14.0%

IUX insurance..... +3.8%
HMO healthcare.... +7.9%

In addition to strength in the financials there were some government regulators making headlines and feeding the fire in stocks. U.S. Congressman Barney Frank, who sits on the House Financial Services Committee, was quoted today as saying that the "up tick rule" might be reinstated within a month. While it's debatable that this up tick rule would have much impact on the market there seems to be some psychological significance to it being put back in force.

Meanwhile Federal Reserve Chairman Ben Bernanke spoke at the Council on Foreign Relations this morning. Bernanke said that he was against suspending the rules on "mark-to-market" accounting but that the Fed might be flexible in tweaking the system. Bernanke also said that the U.S. needs a systemic risk regulator and if it's not the Fed then the Fed should be involved and any such regulator needs to work with a global scope.

Here's a quick look at the major indices:

Chart of the S&P 500:

Chart of the NASDAQ Composite:

Chart of the Dow Jones Industrial Average:

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