Stocks rally Tuesday with the Dow ($INDU) seeing a triple digit advance. This blue chip index added 102.30 points to close at 12,654.85. The S&P 500 ($SPX) gained 10.89 points to 1,444.26. The Nasdaq ($COMPQ) tacked on 9.50 points to 2,459.88. Volume remained light with the NYSE trading 1.45 billion shares and the Naz turning over 1.88 billion. Market breadth was positive by a 24-to-9 and 18-to-12 margin on the Big Board and Naz respectively.

Reports that Alcoa (AA) is a takeover candidate with both BHP Billiton (BHP) and Rio Tinto Group (RTP) interested. The value put on the takeover is estimated at $40 billion and this led to a gain of 6.4 percent for AA shares. Shares of BHP and RTP saw gains of 2.3 percent and 3.1 percent respectively. This bit of positive news was enough to spur buying Tuesday, even though Fed Chairman Bernanke is scheduled to speak both Wednesday and Thursday on the Hill. AA's gain accounted for 16 points on the Dow with 3M (MMM) accounting for another 15 points.

MMM announced it would buy back up to $7 billion worth of its own shares in the next two years. This is the largest share buyback the company and ever entered and shows a lot of optimism for the shares. When companies buy back shares, it increases shareholder value and shows that the company feels the stock is undervalued. Of the 30 components on the Dow, only two lost ground; IBM (IBM) and Johnson & Johnson (JNJ), but both were small losses.

Shares of General Motors (GM) were another positive for the Dow with the auto maker receiving an upgrade at Merrill Lynch. Merrill moved the stock to a "Buy" from "Sell" on the view the company will use its liquidity and assets to affect positive change. 

Oil prices gained ground on Tuesday, rising $1.25 a barrel to $59.06. The International Energy Agency [IEA] raised its 2007 global forecast for oil consumption. Energy prices are a concern for the Fed, but prices have remained below $60 a barrel, which is a key resistance point. Tomorrow traders will get the weekly inventory data and this could impact prices as well. 

Now the attention turns to Mr. Bernanke and his take on the economy and monetary policy. Traders would like to hear the Fed Chairman say that the economy is strong, but inflation is cooling. This would ease concerns about higher interest rates and would provide a base for solid profits going forward. 

Jody Osborne
Senior Staff Writer & Options Strategist
Optionetics.com ~ Your Options Education Site