The arrival of summer's dog days has the bulls howling with glee.

Against a backdrop of sluggish volume and little positive fundamental news -- in fact, more cautionary economic data -- stocks staged another solid rally today.

The Dow Jones Industrial Average closed up 2.4%, to 8990.93, the S&P 500 rallied 2.4%, to 950.74 and the Nasdaq Composite jumped 2.5%, to 1,394.68. The averages each closed above the Securities and Exchange Commission cleared the certification of the company's financials; their 50-day moving averages of 8863 for the Dow, 934 for the S&P and 1378 for the Comp, while the closes for the Dow and S&P were the highest since July 9.

The rise was remarkably steady, especially relative to some recent sessions where late-hour surges have powered the major indices. Today, by contrast, stocks got off to a healthy start thanks to better-than-expected quarterly results at Lowe's ( LOW) and Toys R Us ( TOY), and the advance picked up steam as the day progressed.

"I think we're into a pretty good 'under the radar' rally that people are continuing to dismiss out of hand; they're not giving it any credence," said Anthony Cecin, manager of Nasdaq trading at U.S. Bancorp Piper Jaffray in Minneapolis. "I love to see this kind of activity -- the market is up on little volume and people tend to discount it."

Indeed, many naysayers observed trading volume has declined markedly since the selloff climaxed on July 24. Today, barely 1.3 billion shares traded on the Big Board, 19% below the three-month daily average, according to Bloomberg, while 1.4 billion were exchanged in over-the-counter activity. Advancing stocks bested decliners 2-to-1 in NYSE trading and by 20 to 13 in over-the-counter activity.

That's not exactly the most compellingly positive breadth and critics also noted big gainers included recently battered names such as:

  • AOL Time Warner (AOL), which rose 6.1% after the SEC cleared the certification of the company's financials;
  • Nokia (NOK), up 5.2% following a Gerard Klauer Mattison upgrade;
  • Dynegy (DYN), which climbed 35.5% after closing the sale of its natural gas unit to MidAmerican Energy Holdings for $928 million cash and $950 million of assumed debt;
  • Vivendi Universal (V), higher by 22.2% amid optimism about its efforts to raise cash and reduce debt;
  • Nvidia (NVDA) gained 18.3% after Hewlett-Packard (HPQ) said it will begin selling a business PC that incorporates the company's graphics chips.
  • In addition, Qwest (Q), J.P. Morgan (JPM) and Tyco (TYC) also were on the rise today. More generally, the Philadelphia Stock Exchange Semiconductor Index rose 4.2% and the Nasdaq Telecom Index climbed 3.2%.
  • Such gains -- along with strength in big-caps such as IBM ( IBM) -- were more than enough to offset a 16.3% decline in shares of AstraZeneca ( AZN), which received disappointing trial results for its experimental cancer drug, Iressa. OSI Pharmaceuticals ( OSIP), which currently has a similarly structured drug, Tarceva, in trial, fell 57.1%. The Amex Biotech Index fell 2%.

    Strength in the aforementioned miscreants generated catcalls from the skeptics. One man's "bargain-hunting" is another's "speculation in the same-old names." ( Earlier today I mused about developments in high-yield bonds, another highly speculative sector that has apparently started to recover from some devastating losses.)

    There was seemingly little fundamental reason for the gains in many previously downtrodden sectors, and the day's macroeconomic data provided only more reason for concern.

    The Conference Board reported a 0.4% drop in its Index of Leading Economic Indicators for July, the largest drop since September 2001, while June's LEI was revised downward to a drop of 0.2% from flat previously. The back-to-back declines were the first for the index since March 2001, which the government later reported was the "official" beginning of last year's recession.

    "While not pointing decisively toward renewed recession, the recent behavior of the index is consistent with our forecast for a continuation of rather subdued, slightly below-trend economic growth over the next six to nine months," said Peter Kretzmer, senior economist at Banc of America Securities. "The degree of softness will determine whether or not the Federal Reserve eases," he added, although most economists -- and the fed-fund futures contract -- suggest they will ease on or before the next scheduled policy meeting on Sept. 24.

    Amid the latest news of economic weakness, the price of the benchmark 10-year Treasury rose 7/32, to 100 20/32, its yield dipping to 4.30%. That Treasuries advanced despite renewed strength in equities -- counter to the trend evident late last week -- had some observers suggesting the bond market isn't convinced equities can sustain a rally that is now two weeks old.

    Optimists like Cecin, however, embraced all the doubts.

    "Sentiment is still overwhelmingly bearish and I think it's going to be healthy because I don't think anyone is going to dive in with both feet," the trader said. "Hopefully, we'll trade in a range that doesn't get anyone excited, and the market makes higher highs vs. lower lows. I want them to discount this rally until the end of the year."

    Cecin isn't looking for "exponential growth," but continued strength in equities much beyond Labor Day would surprise a great many market watchers and participants.
    Aaron L. Task writes daily for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. He invites you to send your feedback to Aaron L. Task.

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