Against Backdrop of Intraday Strength, Wall Street Debates the Bottom

The major indices all are firmly higher at midsession as talk of a spring/summer rally mingles with lingering wariness.
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In the aftermath of the big selloff a few of Fridays ago there was a lot of talk about whether the market had touched bottom. One camp argued that the drop was somehow incomplete, and that more pain would surely come. The other said that there was nothing incomplete about the downdraft. It was time to step in and buy.

It was the latter group, at least in the short term, that was worth listening to. The storm has settled and with it the chop that had kept investors reaching for the Bromo-Seltzer. Trading screens are a healthy shade of green today, bespeaking a broad-based rally that's carrying all the major indices higher. You'd almost think last month's drop had never happened. At least for now, things are looking pretty good.

"Basically, it's a spring bottom leading to a summer rally," said Phil Roth, chief technical analyst at

Morgan Stanley Dean Witter

. "The next big test comes in the fall. I think we had a selling climax in the middle of April in the glamour stocks and it's producing a minor base and a temporary recovery."

For traders, however, it's not so cut and dried.

"It's tough right now," said

JNK Securities

partner Scott Kaplan, who works from the floor of the

New York Stock Exchange

. "You can't have such a great feel. You get a little pop based on earnings, and then once earnings die down a bit you have your rate fears and BAM!"

To some, that back-and-forth between good earnings and an unfriendly rate environment means stocks will remain range-bound until investors get some sense of when the

Federal Reserve will go back on hold. Wall Streeters widely expect the

Federal Open Market Committee's next meeting, May 16, to produce at least a 25-basis-point hike in the

fed funds rate, and possibly a 50-basis-point leap.

A Bottom Forms -- For Now
Nasdaq Composite Index, two months

"We're busy bouncing off an oversold area," said Scott Curtis, senior trader at

Brown Brothers Harriman

. "Earnings season has worked out well. The economic numbers -- the markets took them well" considering how strong they were.

But Curtis reckons that "there's still pressure on the market. We might even go down again to retest. There's still a lot damage."

Around midsession, the

Dow Jones Industrial Average

was up 83, or 0.8%, to 10,816. Much of that strength came from


(MSFT) - Get Report

, up 4.5%, which was adding 15.51 points to the benchmark index.

Several analysts came out with positive notes on the software king this morning, after the government on Friday asked a federal judge to break the company into two separate companies. Most notable was

Lehman Brothers

analyst Michael Stanick's report, which said if Microsoft would be worth $120 a share if it were broken up.

The bump in Microsoft was also helping to lead the

Nasdaq Composite Index

higher -- it lately was up 96, or 2.5%, to 3957. The

S&P 500

was up 18, or 1.2%, to 1470.

Internets continued their recovery. Internet Sector

index was up 31, or 3.4%, to 926.

The small-cap

Russell 2000

was up 10, or 2.1%, to 517.

The 10-year Treasury was off 6/32 to 101 26/32, lifting its yield to 6.25%.

Market Internals

New York Stock Exchange:

1,673 advancers, 1,069 decliners, 492 million shares. 58 new 52-week highs, 19 new lows.

Nasdaq Stock Market:

2,451 advancers, 1,422 decliners, 818 million shares. 39 new highs, 36 new lows.

For a look at stocks in the midsession news, see Midday Stocks to Watch, published separately.