DOW >>> Seven Days of Gains

Wall Street was able to barely eke a seventh-straight day of gains Wednesday after a positive housing report showed new homes sales accelerated during the month of July. Investors stayed cautious on Wednesday after a rally.

For the third consecutive day, equities bounced after favorable news, but the gains fizzled. After a five-month run-up that has pushed the broader S&P 500 up 52 percent from its 12-year closing low on March 9, analysts have been questioning the rally's strength even as economic data points to improved demand.

At the 4 p.m. close in New York, the Dow Jones Industrial Average rose 4.46 points, or 0.05%, to 9543.75, the Standard & Poor's 500 gained 0.12 points, or 0.01%, to 1028.12 and the Nasdaq Composite rose 0.2 points, or 0.01%, to 2024.43.
Stocks, however, reacted little to another report from the Commerce Department that showed durable goods orders rose in July by 4.9%, the third rise in the economic indicator in four months. The rise was considerably better than the 3% rise that economists had been looking for.

What goes up must come down?
What goes up eventually comes down, even in stock markets. Still, it can take a long time, much to the chagrin of those looking for a buying opportunity.

Many have warned of a reckoning, where the stock market gives up the gains of more than 50 percent posted by major U.S. averages since March. Yet the market has gone from strength to strength as the economy emerges from the worst recession since the 1930s.
Those waiting for a much talked-of pullback of 10 percent or more may be cooling their heels for a long time, if previous market experiences are any guide. The rallies that commenced after the two most recent U.S. recessions ran longer than pessimists expected.

"You might not get that decline if that's what you're waiting for," said Cleveland Rueckert, market strategist at Birinyi Associates in Stamford, Connecticut. "A lot of people have been and probably will be surprised how far the market can go."

Six months before the United States pulled out of recession in March 1991 the stock market began to rally. Seven years later the S&P 500 .SPX had more than tripled in value without ever pulling back by 10 percent. This was not the only time markets have run ahead without a significant correction. Coming out of a bear market after the dot-com bubble, the S&P 500 surged 95 percent from 2003 to 2007, again, without a 10 percent correction.
In March, when the S&P 500 hit an intraday low below 700, investors were pricing in a doomsday scenario in the economy and financial markets. That nightmare outcome is now off the table as signs of recovery continue to sprout.

"A lot of people are coming to the realization that total meltdown is off the table," said Robert Auer, a fund manager at SB Auer Funds in Indianapolis, Indiana. "The market is up 50 percent and they just now got that message." Since March, corrections have been threatened, but none have taken place. Between mid-June and early July, the S&P 500 fell 9 percent, but buyers emerged shortly thereafter, and this has been the pattern with each mini-correction since March.

The rise comes amid a still-uncertain outlook for the economy. Rising government debt and the ongoing deleveraging of the private sector threaten economic growth. Investors took second-quarter earnings results as a positive, but companies used cost-cutting as a means to achieve better earnings, as demand was still slack. Some worry about a double-dip recession as foreclosures and commercial real-estate problems mount.

OIL FUTURES: Nymex Crude Ends Lower As Oil Stockpiles Grow
Crude futures settled lower Wednesday as U.S. oil inventories continued to rise. Light, sweet crude for October delivery settled 62 cents, or 0.9%, lower, at $71.43 a barrel on the New York Mercantile Exchange. Brent crude on the ICE futures exchange settled 17 cents, or 0.2%, lower, at $71.65 a barrel.

A return to the 10-month high of $75 a barrel hit Tuesday looked increasingly remote after the Department of Energy reported a 100,000-barrel increase in U.S. oil inventories. Inventories are about 15% higher than they were a year ago, while demand was down 0.9% in the four weeks ended Aug. 21, the department's Energy Information Administration said. Analysts had given an average forecast for a 600,000-barrel drop, according to a Dow Jones Newswires survey.

Expectations of an even bigger increase - fed by the American Petroleum Institute's report Tuesday of a 4.3-million-barrel build - prevented the bottom from dropping out of the market, traders said.

Fuel inventories are in even worse shape, with stockpiles of gasoline and distillate, a category that includes heating oil and diesel, well above average for this time of year. Gasoline inventories fell 1.7 million barrels last week, more than analysts expected, while distillate stocks rose by 800,000 barrels, topping forecasts.

"Given the supply situation, I can't see prices being able to pull away from the range we've been trading at," said Matt Zeman, president of trading at LaSalle Futures Group in Chicago. "Temporarily, the highs are probably in."