Stocks rise, but is rally peaking?

Updated at 7:03 p.m. ET

A small rally broke out of a snoozy market late today, pushing the Standard & Poor's 500 Index ($INX) to its highest level since August, as investors shrugged off reports of weaker-than-expected growth in industrial production and manufacturing in New York state.

Japanese efforts to drive the yen lower against the dollar were having little effect on U.S. stocks.

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The Dow Jones industrials ($INDU) closed up 46 points to 10,573. The S&P 500 was up 4 points to 1,125, its highest level since Aug. 9. The Nasdaq Composite Index ($COMPX) was up 12 points to 2,301.

Stocks moving the market included:

• Travelers Companies (TRV) was the top Dow performer, up 2.9% to $52.49. The insurance company expects to buy back $4.5 billion to $5 billion in its stock, up from prior guidance of $4 billion.
• Pall (PLL), a supplier of filters for drug makers and refineries, was the top S&P 500 performer, up 6.3% to $40.41. Fiscal-fourth-quarter results and its fiscal 2011 forecast beat analyst estimates. 
• Savient Pharmaceuticals (SVNT) surged 35.4% to $19.98, tops among stocks in the Russell 2000 Index ($RUT.X). The biotech won Food and Drug Administration approval for an arthritis drug that may generate $1 billion a year in sales.
• AK Steel (AKS) was the worst S&P 500 performer, down 5.7% to $13.70. The third-largest U.S. steelmaker now expects a third-quarter operating loss of $20 a ton, after having forecast a profit of $15 a ton.
• Micron Technology (MU) fell 4.5% to $6.94 after Goldman Sachs analyst James Covello cut the chip maker's rating to "neutral" from "buy." Tablet computers will cut into sales of notebooks faster than expected.

The rally came on the second anniversary of the collapse of investment bank Lehman Bros. The Dow fell 504 points after the company filed for Chapter 11 bankruptcy protection on Sept. 15, 2008, and stocks fell more than 40% before bottoming in March 2009.

While a rally on such an anniversary was welcome, there is still worry. Many traders and money managers question how much strength is left in the rally that began on Aug. 26, when the Dow closed at 9,986 and the S&P 500 ended at 1,052. 

The Dow is up about 6% since then; the S&P 500 up 7%. Many analysts believe the S&P 500 won't get much above 1,130 -- roughly its high in June and again in August -- without more evidence of growth.

"The market is way ahead of itself," Cassandra Toroian, the CEO of Bell Rock Capital, told CNBC this afternoon.

 

The S&P 500's chart since May shows that 1,130 resistance level operating nicely.

 

Get ready for Thursday

Thursday is an important day.

It brings three big earnings reports: FedEx (FDX) in the morning and Oracle (ORCL) and Research In Motion (RIMM) after the close. 

FedEx is often looked at a signal of where the economy is headed. Oracle will tell us about corporate spending. RIM's report will help define its prospects in the hyper-intense smart phone business.

In addition, the government will report on initial jobless claims, which have fallen for two straight weeks after hitting 504,00 in the week ended Aug. 14.

Futures trading suggests stocks will open slightly lower, as they did on Tuesday and today.

Energy prices -- New York close
			Wed.			Tues.			Month chg.			YTD chg.
Crude oil			$76.02			$76.80			5.70%			-4.21%
(per barrel)
Heating oil			$2.1326			$2.1288			7.07%			0.80%
(per gallon)
Natural gas			$3.9950			$3.9660			4.69%			-28.30%
(per mil. BTU)
Unleaded gasoline			$1.9078			$1.9148			5.66%			-4.40%
(per gallon)
Retail gasoline			$2.7310			$2.7170			2.02%			3.49%
(per gallon; AAA)

Two market catalysts
One catalyst late today was the Interior Department's announcement that it will require oil companies to set permanent plugs in some 3,500 nonproducing wells that have only a subsurface safety valve. It also wants 650 platforms dismantled if they're no longer being used.

That move could be great for three companies: Superior Energy (SPN), up 9.6% to $26.51; Hercules Offshore (HERO), up 7.5% to $2.45; and Tetra Technologies (TTI), up 13.6% to $10.36.

A second catalyst was the hope of more acquisitions or moves to return cash to shareholders in the form of stock buybacks.

Early in the day, the big news was the yen after the Japanese government sold the currency for the first time in six years in a bid to push it  lower against the dollar. The yen has been at a 15-year high against the dollar. A rising currency can make exports more expensive and cheapen imports and can cut the value of profits earned abroad.

If the dollar rises by 1 yen, Bloomberg News said, it will cut Toyota's (TM) operating profit by 30 billion yen -- or $350 million.

Japan is considering selling the yen against the dollar for a second day, Bloomberg said.

The dollar has surged 3.3% against the yen to trade at 85.76.
 
Crude oil fell 78 cents to $76.02 per 42-gallon barrel. Gold fell $3 to $1,268.70 an ounce after hitting a closing high on Tuesday.  Interest rates were higher, with the 10-year Treasury yield rising to 2.723% from 2.66% on Tuesday. 

Growth wanes in manufacturing 

Stocks had fallen earlier today after the New York Federal Reserve Bank's Empire Manufacturing Index, a gauge of business conditions in the region around New York, fell to 4.1 in September from 7.1 last month. 

Economists had expected the measure to decline to 6.4, according to Briefing.com. Figures greater than zero indicate expansion.

The Federal Reserve said industrial production rose 0.2% in August, less than the 0.3% economists expected, after increasing a revised 0.6% in July. Capacity utilization was 74.7%, little changed from the previous month.

Material from The Street.com was incorporated into this post.

Short hits from the markets -- New York close
			Wed.			Tues.			Month chg.			YTD chg.
Treasury yields
13-week Treasury bill			0.150%			0.145%			11.11%			200.00%
5-year Treasury note			1.443%			1.428%			7.53%			-46.28%
10-year Treasury note			2.723%			2.666%			9.93%			-29.14%
30-year Treasury bond			3.874%			3.786%			9.65%			-16.53%
Currencies
U.S. Dollar Index			81.751			81.339			-1.49%			4.51%
British pound			$1.5627			$1.5538			1.80%			-3.39%
(in U.S. $)
U.S. $ in pounds			£0.6399			£0.6436			-1.77%			3.51%
Euro in dollars			$1.3017			$1.2995			2.67%			-9.18%
(in U.S. $)
U.S. $ in euros			€ 0.7682			€ 0.7695			-2.60%			10.10%
U.S. $ in yen			85.76			83.01			1.97%			-7.78%
Canada dollar			$0.975			$0.973			3.89%			2.52%
(in U.S. $)
U.S. dollar			$1.027			$1.028			-3.74%			-2.45%
(in Canadian $)
Commodities
Gold			$1,268.70			$1,271.70			1.47%			15.74%
(per troy ounce)
Copper			$3.4665			$3.4685			3.14%			3.59%
(per pound)
Silver			$20.5710			$20.4320			6.05%			22.12%
(per troy ounce)
Wheat			$7.2675			$7.3600			11.38%			34.21%
(per bushel)
Corn			$4.9525			$4.8350			16.67%			19.48%
(per bushel)
Crude oil			$76.02			$76.80			5.70%			-4.21%
(per barrel)