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 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.