Liquidity Fears Evaporate

Fear of the unknown and a sense that there is more correction in credit markets to go is fostering wild swings in the stock market. But investors ended another session with a positive bent Wednesday.

The bullish argument that the strength of the global economy will uphold the markets took center stage following Cisco Systems'(CSCO Quote - Cramer on CSCO - Stock Picks) chief executive's comments on the company's earnings conference call Tuesday night.

"In 30 years, this is the strongest global economy I have been a part of," said Chambers on the call. The company also increased its earnings guidance. Cisco gained 6.7% on the day.

The Dow Jones Industrial Average surged 153 points, or 1.1% to close at 13,657.86 while the S&P 500 added 1.4% and the Nasdaq Composite jumped 2%.

"Chambers reminded everybody of what the key drivers of this market have been, credit issues notwithstanding," says Art Hogan, chief market analyst at Jefferies & Co. "You have a global growth rate of 4.5% to 5%. That's what the global markets' strength is all about."

Certainly, the global economy can falter too, as central banks reach the apex of their tightening cycles and inflation remains a problem in countries like China. But while it lasts, the $1 trillion of currency reserves in China, among other lender nations, remain a strong driver of global liquidity.

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