Stocks Programmed for Big Gains

Ford Motor's(F Quote) unexpected ability to raise massive amounts of liquidity in the debt markets garnered an analyst upgrade from Merrill Lynch to neutral from sell. Ford's shares surged 3.3% on the day.

Unexpected liquidity is the theme for the year, as cash continues to flood the financial markets, giving stocks little reason to pull back.

To wit, Citigroup chief U.S. equity strategist Tobias Levkovich increased his 2007 targets for the S&P 500 and Dow in part due to the cash supporting stocks from corporate balance sheets and private-equity activity. He upped his Dow target to 14,000, and the S&P 500 to 1,600.

There seemed no reason not to buy stocks Thursday even as oil prices surged, too. Often a reason to hit the sell button, oil rose 1.9% Thursday to close at $62.51 per barrel on the Nymex. The catalyst was OPEC's decision to cut production by 500,000 barrels per day come February 2007. OPEC announced production cuts of 1.2 million barrels per day in October.

OPEC and oil refining companies are united in putting a floor of $60 per barrel uder oil, says Cantor Fitzgerald's Pado. He notes that OPEC may be cutting production to reduce supply, but oil refiners aren't buying as much either. Refiners want to eat through inventories to sustain high prices as well. The refiners had ramped up their oil inventories through the summer at higher prices on fears of escalating geopolitical turmoil. Recent Energy Department data show a slowing of refining activity lately to below 90% of capacity, which is unusually low for this time of the year, says Pado.