Windows of Opportunity: Microsoft Ruling Gives Market a Needed Shot of Adrenaline

Animal spirits, anyone?

It did nothing to alter the malaise that has lain over the U.S. economy. In no way were the inventory overhangs and capacity excesses that are grinding into profits reversed. But today's decision by a U.S. appeals court to overturn a ruling splitting Microsoft (MSFT Quote) helped light a fire under the stock market nonetheless.

"This is something we've been waiting on for over a year," gushed C.E. Unterberg Towbin head of trading Brian Finnerty. "It's a big, big positive."

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Although shares of Microsoft were still halted -- with indications that they may remain so for the remainder of the day -- other stocks were bathed in green following the court's announcement. In midafternoon trading, the benchmark S&P 500 was up 1.7% while the Nasdaq was up 3.3%. The Dow Jones Industrial Average, of which Microsoft is a component stock, was up 1.8%.

"I'm not going to say it's going to last, but you get something like the Microsoft settlement and it changes sentiment," says Jim Volk, co-director of institutional trading at D.A. Davidson. "It's the psychology that moves the market."

By some lights, the decision merely gives the market an excuse to do what it was going to do in any case.

"The market built up a tremendous amount of compression," says Bollinger Capital Management head John Bollinger. "If you look at money-market funds as a percentage of investable assets, they're very high. That's an indication that there's pretty strong pent-up demand here for equities in general -- people are looking to get back into the market."

But for those who reckon that today's decision will make for a V-shaped rally, a classic bottom akin to what was seen during the economic crises of 1997 and 1998, one hedge-fund trader advises caution.

"Everybody is looking for the one event to turn things around," she says. "I don't think that's what it's going to be. It's going to be an accumulation." Eventually the good news will outweigh the bad, but where that point will be won't be clear-cut.