Stocks Set for Early Run

Bulls looked past the flattened yield curve and took another run at stocks early Wednesday, hoping to convert believers to the year-end-rally thesis.

Index futures recently showed the S&P 500 trading 4 points above fair value, while the Nasdaq 100 was set for a 5-point jump. The 10-year Treasury bond fell 6/32 in price to yield 4.36%, matching the yield on the two-year note. The dollar fell against the yen and euro.

Oil, whose decline Tuesday sparked a selloff in energy stocks, was steady, with February crude recently trading at $58.20 a barrel, up 4 cents from Tuesday. An update on the AccuWeather Web site continues to predict above-average temperatures for most of the U.S. through this weekend.

Overseas markets were mixed, with London's FTSE 100 recently adding 0.3% to 5610 and Germany's Xetra DAX adding 0.1% to 5452. In Asia, Japan's Nikkei rose 1.4% overnight to 16,195, while Hong Kong's Hang Seng lost 0.5% to 15,102.

Stocks took a beating Tuesday as early strength in the futures fell apart when the spread on the two- and 10-year Treasury bonds converged. Some investors fear a flat yield curve because of its impact on lending spreads and believe it augurs badly for the economy. The Dow Jones Industrial Average, S&P 500 and Nasdaq Composite each lost about 1% in sketchy volume on Tuesday.

The Dow is now down 5 points for the year. The S&P 500 remains up 53.5 points, or 4.4%, while the Nasdaq has risen 52 points, or 2.3%. Since the start of 2003, the Dow is up 29%, the S&P 500 is up 43% and the Nasdaq is up 67%. But since the start of 2000, the Dow is down 6.3%, the S&P 500 is down 14%, and the Nasdaq is off 45%.

Among stocks Wednesday, J.P. Morgan upgraded Albertson's(ABS - Cramer's Take - Stockpickr) to neutral, saying shareholder activists now have room to work after the company's takeover by CVS(CVS - Cramer's Take - Stockpickr), Kimco(KIM - Cramer's Take - Stockpickr) and Supervalu(SVU - Cramer's Take - Stockpickr) went south.