A torrent of ominous news about the consumer Tuesday was not strong enough to prevent the stock market from staging an impressive rally.

Each tick of the

S&P 500

toward a new record and each tick of the

Dow Jones Industrial Average

past 13,000 has investors wondering when this technically overbought market will correct again.

Traders worry that the complacency that led to late February's retrenchment has returned. But the strong global economy combined with M&A and better-than-expected earnings still trump concerns about weakness at home as the indices march on to new highs.

"Folks are still excited about Dow 13,000," says Al Goldman, chief market strategist at A.G. Edwards. "On Wall Street, add three zeroes to a 13 and you have the land of milk and honey."

The DJIA closed up 0.6% at 13,136.14 Tuesday. The S&P 500 and the

Nasdaq Composite

each gained 0.3% to close at 1486.30 and 2531.53, respectively.

Goldman notes that the market's recent move has been fast and furious. The Dow has risen 9% since its low this year on March 5. Rich Ishida, chief technical analyst at Market Vane, agrees, noting that bullish consensus reached a two-year high for the S&P at 75% at the end of last week. It stands now, still overextended, at 72%. The Nasdaq Composite registered a new 24-month high with a 77% bullish consensus.

"Anyone with a pulse knows the market is near-term extended," says Goldman.

But "overextended" markets can stay that way for a long time. Such was the case on Tuesday as U.S. stocks were unhindered even as the National Association of Realtors reported that pending home sales plunged 4.9% in March, and auto companies reported weak April sales figures.

Supporting the Dow were gains in the blue-chip names that have become so favored by investors in this environment of a weak dollar amid a strong global economy.


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Hewlett Packard

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gained over 1.5% apiece on the day.

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Ishida wonders if instead of scaring away foreign buyers, the weak dollar may have attracted them into large-cap U.S. equities. Relatively speaking, U.S. stocks have not kept up with the rallies and valuations of other asset classes -- from overseas stock markets to junk bonds and even U.S. Treasuries. Foreign flows are hard to capture in real time. They are measured by the U.S. Treasury Department, but reported with a two-month delay. March's flows will be reported on May 15.

Meanwhile, supporting

Dow Jones'

( DJ) 55% rally was news that Rupert Murdoch's

News Corp.

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made an unsolicited bid for

The Wall Street Journal's

parent company. The $60 per share bid represents a 65% premium over the stock's closing price Monday.


Dow Jones buyout story highlights another safety net in the stock market these days. Merger-and-acquisition activity seems ever present, and no industry is off limits, a factor that scares away the short-sellers, says Goldman.

But corporate America also revealed signs of a fledgling consumer.

Circuit City

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Liz Claiborne

( LIZ) reported weak earnings and provided weak forecasts for the year. Already struggling Circuit City fell 5.3% when it said sales of flat-panel televisions were weaker than expected; the company pulled its earnings outlook for the first half of the year. Liz Claiborne dropped 18.7% when the company missed earnings estimates and said it expects its 2007 earnings will fall short of prior expectations.

Economy.com's chief economist Mark Zandi says Tuesday's housing data -- the NAR's pending sales index -- shows the spring selling season for real estate is off to an unimpressive start. That means "the risk to the consumer is rising," says Zandi. "It is hard to disentangle" falling house prices and the consumers' willingness to spend, he says, adding that rising gasoline prices aren't helping matters.

That said, bulls argue that global stock market strength helps to offset the wealth lost in people's homes, and other parts of the economy are turning back up. The Institute for Supply Management's measure of manufacturing activity rose to a higher-than-expected 54.7 in March.

If consumer spending comes down a little bit, growth may pick up from other places. "The idea is sustainable growth," says Michael Darda, chief economist at MKM Partners. "Households have been saving too little, and companies not spending enough," he says, adding that perhaps companies will start to pick up the slack going forward.

Meanwhile, the key to sustaining the consumer is the job market, say Zandi and Darda. The next read on that comes Friday, with April's nonfarm payrolls report -- always a market-mover.

In keeping with TSC's editorial policy, Rappaport doesn't own or short individual stocks. She also doesn't invest in hedge funds or other private investment partnerships. She appreciates your feedback. Click


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