U.S. stocks have now advanced to four-month highs. A swift Dow ascent to 9000 is now quite plausible.
Investors are clearly speculating that banks don’t need as much capital as had been projected. As the regulator's details on top bank stress tests become clear, it may be one of many catalysts on Thursday to launch this rally into overdrive:
1. In an interview with PBS Wednesday night Treasury Secretary Timothy Geithner said none of the 19 banks that underwent government stress tests are insolvent. The Secretary emphasized to interviewer Charlie Rose, that the results will reassure investors and the public that the U.S. financial system is sound. If the details are indeed convincing, investors will applaud quickly by opening their wallets.
2. Earlier Wednesday, the ADP report on employment cheered investors. That data may have further positive validation from the government's initial claims report Thursday morning. Further, the Monster employment index is also released Thursday morning. With the markets responding quite positively to the ADP release, a falling initial claims release combined with good news from the Monster report could have quite an euphoric effect on stock investors.
3. The report on chain store sales is also likely to give investors a boost. Earlier in the week, the retail Redbook report pointed to continued recovery in retail sales through May. Confirmation from the chain store report will leave pessimists and short sellers with limited fear to write about from that improving sector.
4. More large institutions and their advisors are shifting to more positive stances on the economy. While many remain cautious, each day sees a new economist convinced of a solid second half of 2009. On Wednesday morning Larry Kantor, head of research at Barclays Capital said, "There will be a 'surprising rebound' in the U.S. economy in the second half of 2009."