Stocks Programmed for Big Gains

"The market is beginning to get used to this story," says Pado. Also, if oil is priced slightly higher because of economic strength, the stock market can handle it, he says. More especially given the positive influence of energy stocks such as Exxon Mobil (XOM Quote), ConocoPhilips (COP Quote) and Halliburton (HAL Quote).

On the other hand, the economic story continued to punish the bond market Thursday. A day prior than expected, the New York Fed released a stronger-than-expected survey of business conditions in December. The Empire State Index read 23.1, well above consensus expectations for a reading of 18.

Also, initial jobless clams fell by 20,000 in the week ended Dec. 9. It was the second week of declining claims, suggesting the late November spike in claims was a seasonal anomaly. However, the four-week moving average is 427,000, above the range of 306,000 to 318,000 that persisted from June through mid-November.

Still, fixed-income traders focused on the latest data points, which point to stronger economic growth and less likelihood of a Fed rate cuts. The 30-year Treasury bond slipped 10/32 to yield 4.72%, while the 10-year note fell 4/32 to yield 4.59%, and the two-year note fell 2/32 to yield 4.73%. Bond prices move inversely to their yields.

"Yesterday the bell rang for bonds," says Pado.

Indeed, Wednesday was the gong show for Treasuries. On Thursday, they rang a more pleasant-sounding bell for stocks.