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Wednesday's session laid to rest any debate over whether a majority of market participants still believes winning the war in Iraq will cure what ails the stock market and U.S. economy: As allied forces advanced on Baghdad, major averages reacted with euphoria, all but ignoring another round of disappointing economic data.

In keeping with recent patterns, the dollar rose in concert with equities while Treasuries, gold and oil headed in the opposite direction.

Stock futures were higher preopen and equity proxies leapt at the opening bell amid reports allied forces had destroyed two Republican Guard divisions and had advanced within 25 miles of the Iraqi capital. News of the rescue of POW Jessica Lynch added to the mix of optimistic, patriotic and bullish fervor. Cynics questioned the logic of linking those emotions but the link was unmistakably evident as the market added to its initial bounce and then held steady for much of the session.

Lost in the war-inspired rally was any concern about the still-unfinished task of capturing Baghdad and ending Saddam Hussein's regime, as well as a potentially

troubling aftermath. Nor did traders seem to care much about a larger-than-expected 1.5% drop in February factory orders or a 17% drop in mortgage applications last week.


Dow Jones Industrial Average

rose 2.7% to 8285.06 vs. its intraday high of 8316.64. The

S&P 500

jumped 2.6% to 880.90 vs. its session high of 884.57 and the

Nasdaq Composite

rose 3.6% to 1396.72, also ending a touch off its highs.

The Comp's outperformance and a 6.3% gain by the Philadelphia Stock Exchange Semiconductor Index had some observers decrying the session as evidence of a revival of mania-era attitudes (assuming they ever went away).

Such views were further encouraged by big percentage gains on active volume for tech giants


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, erstwhile highfliers such as

JDS Uniphase


, and biotech names such as



, which upped guidance. The Merrill Lynch High-Tech 100 rose 4.8% and the Amex Biotech Index rose 4.7%.

But declaring "it's 1999 again" both oversimplifies the situation and overlooks the fact that many market players are no longer myopically focused on tech. Nor were they the only ones on the move Wednesday.

The overall advance was pretty broad-based and, once again, there was better volume on rally days, vs. down days. Advancing stocks bested decliners 23 to 9 in Big Board trading, where up volume was 86% of the 1.6 billion total. Gainers led 22 to 9 in over-the-counter activity, and up volume was 82% of the 1.3 billion-share total.

"Obviously we're trading on emotions, based on how the troops are doing overseas," said Scott Curtis, head of U.S. equity trading at Credit Lyonnais. "But underlying

that is a tactical asset allocation out of Treasuries and into equities." The price of the benchmark 10-year Treasury fell 25/32 to 99 20/32, its yield rising to 3.92%.

Within equity-only accounts, Curtis observed a shift toward buying cyclicals vs. consumer staples, and buying high-beta stocks, including some financials in additional to tech and telecom names. Meanwhile, some traders were selling major oil producers and buying airlines.

The Morgan Stanley Cyclical Index rose 3.3% while


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were among the Dow's biggest positive influences. The Philadelphia Stock Exchange/KBW Bank Index rose 2.9% and the Amex Broker/Dealer Index gained 4.4%.

Crude prices fell 4% to $28.56 Wednesday, helping drag down the Amex Oil Index by 0.7%, although oil-service stocks rallied. Meanwhile, the Amex Airline Index jumped 8.7% and American Airlines parent



soared 41.7% and was the Big Board's second-most actively traded stock.

"People are paid to put money to work," Curtis said. "Every day big portfolio managers decide, 'Do I stay defensive or put money into higher-beta groups?' If the economic numbers are benign or there's good news out of the Gulf, they buy cyclicals and tech and unload oils."

Sometimes they do that even if the economic numbers aren't benign.

Meanwhile, homebuilding stocks jumped on news that Warren Buffett's Berkshire Hathaway is acquiring manufactured housing maker

Clayton Homes


, which jumped 11.7%. Clayton's direct competitor

Fleetwood Homes


jumped 12.8% and the S&P Homebuilding Index rose 4.3%.

Given that Buffett's widely discussed annual letter last month declared "we still find very few

stocks that even mildly interest us," some participants chuckled at the Clayton acquisition.


Buffett says he can't find bargains, I expect him to announce some acquisition the next quarter," quipped one trader.

Less cynically, if the "Oracle of Omaha" can find value for his long-term strategy, what's to stop short-term-oriented traders from taking a more bullish stance? On Wednesday, the answer was: Very little.

Parting Short's

Investors Intelligence

survey showed bullish sentiment dipped to 47.2 Wednesday vs. 47.8 a week ago, while bearish sentiment rose to 34.8 from 33.3.

Meanwhile, the CBOE Market Volatility Index fell 2.5% to 31.29 after hitting a (recent) intraday peak of 41.16 on March 12. The CBOE's put/call ratio fell to 0.68 vs. 0.81 Tuesday and the one-day Arms Index tumbled to 0.39 from 0.90.

Save for the


data, which lags, bullishness is obviously and understandably on the rise. The question is whether or not it has reached critical mass.


Wednesday's rally in respective," recommended Curtis, noting major averages are getting closer to the top end of recent trading ranges and that the economic numbers have not been good. The trader also observed the war is "unquantifiable" and any setback on that front (real or imagined) will have a detrimental effect on stocks.

On the other hand, John Bollinger, president of, suggested the market got "very oversold" before the war, then overbought in the March 12-24 rally and then fell back to neutral in last week's decline. "Now, there's more to come on the upside," he forecast, "especially if our troops prevail as I suspect they will."

Now seems a particularly good time to extend our gratitude and support for the troops, who've been asked to do so much for so many.

Aaron L. Task writes daily for In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in He also doesn't invest in hedge funds or other private investment partnerships. He invites you to send your feedback to

Aaron L. Task.