The stock market's resilience in the face of bad news earlier this week wasn't a fluke after all. Rather, it was a sign of the underlying bullishness that revealed itself in furious fashion Wednesday.

Despite a warning late Thursday by Texas Instruments ( TXN), news of two investigations into Freddie Mac's ( FRE) accounting, and a lackluster beige book survey, major indices rose early and finished with a flurry.

The market's ascent accelerated after the 2 p.m. release of the Federal Reserve's beige book survey, which said the U.S. economy "remained sluggish" in April. Rather than causing consternation, the report sparked celebration as investors anticipated the Fed will now ease by 50 basis points at its June 24-25 policy meeting rather than a mere 25 basis points.

Why equity investors continue to believe more rate cuts will cure the economy's ills remains elusive, especially considering 12 rate cuts from January 2001 until November 2002 proved to be no panacea. Perhaps rate cuts are merely the most obvious sign of the Fed's vigilance to fight deflationary pressures, which is what is really buoying financial assets.

"In fact, central banks have a number of other means at their disposal to stimulate spending should nominal interest rates hit the zero bound," Fed Vice Chairman Roger Ferguson said Wednesday, the latest in a series of such comments from central bankers.

The Dow Jones Industrial Average rose 1.4% to 9183.22, its first close above 9100 since July 1, 2002. The S&P 500 jumped 1.3% to 997.48, while the Nasdaq Composite climbed 1.1% to 1646.02.

Regardless of why, faith in the Fed remains quite intense, as evinced by Wednesday's action.

"Cyclical stocks carried the day as players expect better growth and earnings in the third and fourth quarters, spurred by low rates," observed Scott Curtis, head of U.S. equity trading at Credit Lyonnais. (In other words, the "second-half recovery" story still compels.)

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