Subprime Crashes Dow Party

At the very least, the Bear Stearns news could stem that Dow 14,000 run Wednesday as subprime concerns will likely be on the docket during Federal Reserve Chairman Ben Bernanke's semiannual testimony on Capitol Hill.

Investors don't expect Bernanke to stray from his generally hawkish, but data-dependent mantra. Then again, if you believe history is a guide, his testimony is likely to move the Treasury market -- even if just temporarily. Thomas Higgins, chief economist at Payden Ryel notes that last year when Mr. Bernanke gave his testimony, 10-year Treasury bond yields rose to an intraday high of 5.17% before retreating all the way back to settle at 5.05%. That same day, the S&P 500 stock index rallied 1.9% on expectations that the Fed was going to pause its tightening cycle.

Moving on Mergers & Earnings

Fueling the advance Tuesday was news that News Corp.'s(NWS) offer to buy Dow Jones (DJ) is reportedly closer to completion, though the newspaper publisher's shares fell 0.9%.

Investors could more easily cheer news that Netherlands-based Basell agreed to buy Lyondell(LYO) for $12 billion, sending its shares up 17%. Also, energy company Plains Exploration(PXP) agreed to buy Pogo Producing (PPP) in a cash and stock deal amounting to $3.6 billion. Pogo ended the day up 14% while Plains slipped 6.6%.

Tech stocks, notably chip equipment makers, were also strong amid a positive reaction to results late Monday from Novellus Systems (NVLS) and comments Tuesday from KLA-Tencor (KLAC).

But bellwether tech results after the close were not was robust as the market hoped for. Intel(INTC) posted a quarter that met expectations for profits, but missed on its margins; after gaining 1.5% in the session, its shares were down 3.9% in recent post-close trading. Yahoo!(YHOO) added 3.1% in the session, but was falling 3.7% in after-hours trading after the company reported a decline in profits and merely in-line results.

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