Building on momentum in overseas bourses and a string of better-than-expected earnings reports, U.S. stock proxies shot higher from the opening bell Tuesday and lately were retaining the bulk of those gains.

Prior to the opening of Wall Street trading, a slew of major proxies around the world climbed toward round numbers that may or may not be technically important but seem to have psychological impact. These included 9000 for Hong Kong's Hang Seng, 4000 for London's FT-100, 3000 for the Paris CAC and (almost) 3000 for Germany's DAX.

Similarly, the

Dow Jones Industrial Average

moved beyond 8000 early in the trading day and was up 4% to 8194.30 as of 1:36 p.m. EDT. Meanwhile, the

S&P 500

was moving further away from the 800 level, lately up 4% to 875.40, while the

Nasdaq Composite

was up 4.5% to 1275.35.

Whether any of these round numbers are anything more than just good headline fodder depends on the technical patterns of each specific bourse. But clearly, there's a global rally in equities afoot and it's becoming self-perpetuating: Gains in the U.S. late last week aided the overseas markets, and their gains overnight helped jump-start Tuesday's advance here.

Also buttressing the U.S. advance were better-than-expected earnings from bellwether names such as


(C) - Get Report


Fannie Mae

, and

Bank of America

(BAC) - Get Report

. The Philadelphia Stock Exchange/KBW Bank Index was lately up 6.5%.

Positive comments by Goldman Sachs about


(MSFT) - Get Report


Philip Morris

(MO) - Get Report

further aided the advance.

"They just like 'em," one fund manager said of equities in general. "They've got the shorts by the ..."

The manager, who requested anonymity, is largely defensively positioned and/or short and was "praying I don't get run over." Adding to his concern was an observation that 10 out of the last 12 times the market has opened 1.5% or higher, it has finished at or near its highs of the day. I cannot independently verify that statistic but the implication is that the rally will not dramatically run out of steam today.

The rally since midmorning last Thursday has been so dramatic that "charts that looked horrible are now looking good," he said, noting money is coming out of "safety-type names" such as

Procter & Gamble

(PG) - Get Report



(KO) - Get Report


More dramatically, money was taken from perceived safe havens in Treasury securities and gold and related shares. Of late, the price of the benchmark 10-year Treasury note was down 1 19/32 to 103 6/32, its yield rising to 3.98%. The price of gold was off $5.20 to $313.40 while the Philadelphia Stock Exchange Gold & Silver Index was down 3.6%.

Conversely, as money was coming out of those havens it was going into more speculative areas, including tech plays such as

RF Micro Devices


, which is scheduled to report second-quarter earnings later today,




Marvell Technology

(MRVL) - Get Report


Additionally, the gains and newfound optimism were providing welcome relief to shareholders of two major financial institutions, namely Fannie Mae and

J.P. Morgan

(JPM) - Get Report


Waking Giants

Shares of Fannie Mae lately were up 5.3% after the home-loan financer reported third-quarter earnings of $1.62 per share, excluding one-time items, up from $1.33 per share a year earlier and a nickel ahead of expectations. Also, the firm reported that its commitment to purchase mortgages totaled $57 billion in September and $128 billion in the quarter, both records.

However, because actual mortgage purchases -- of $34 billion in September and $74 billion for the quarter -- lagged commitments, Fannie Mae's portfolio growth slowed to an annual rate of 5.9% vs. 15.2% in 2001's third quarter. For the first nine months of the year, the portfolio was growing at an annual rate of 8.5% vs. 17.5% in the first three quarters of 2001.

In the firm's press release, CFO Timothy Howard said it was not unusual for commitments to outpace actual purchases during periods of heavy refinancing and that the outlook for portfolio growth was "very promising" through the first part of 2003.

Regarding its much-discussed duration gap, Fannie Mae reiterated what it originally reported

Oct. 1: that the difference between the maturity of its assets and liabilities shrank to 10 months in September from a record 14 months in August. Concurrently, the firm's net interest income at risk fell to 4.4% for its one-year portfolio and to 3.9% for its four-year portfolio in September vs. at least 6.5% for each in August.

Recent bond market action has certainly gone in Fannie Mae's favor today as well. Higher bond yields should lead to higher mortgage rates and a lessening demand for refinancing, which should further alleviate pressure on Fannie Mae's duration gap.

Similarly, the rally in equities and relaxed concern about financial names was providing a lift to J.P. Morgan, whose shares were lately up 9.8%. When it warned in

mid-September, J.P. Morgan said it expected trading revenue to fall by $1 billion in the third quarter on a sequential basis to $100 million, due the synchronous declines in global equities. The recent rally in world stock proxies should alleviate some of those concerns, as does the recent weakness in gold; J.P. Morgan is rumored to be heavily short the yellow metal via derivatives contracts.

Much of the gain in J.P. Morgan today was being attributed to the better-than-expected results from Citigroup and Bank of America. But it is unlikely consumer lending will provide as much of a boon to J.P. Morgan as to its peers when the firm reports its quarterly results Wednesday. Furthermore, questions remain about J.P. Morgan's

derivatives exposure; the implications of the Oct. 27 runoff in Brazil's presidential elections and the decision of that nation's central bank to raise its key lending rates; as well as its exposure to firms such as



, where an audit could trigger a technical default of some bank covenants, as per a recent story in

The New York Times


All these issues, and others, are likely to be discussed during what may be a contentious conference call with J.P. Morgan's executives on Wednesday. Then again, we must give CEO William Harrison & Co. credit for (presumably) standing up to be counted on the call, especially in comparison with Fannie Mae. The government-sponsored entity holds only two conference calls a year, after its second and fourth quarters, so no additional information from the company beyond its published reports was immediately available.

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.