That was quite a rally yesterday. A big drop in new unemployment claims, some pretty good retail numbers from February, and some hope that the Libyan situation may be nearing an end, bolstered the good vibes from Wednesday's ADP private payroll report and sent stock flying higher.

The entire "Apple Complex" of did pretty well, too...

The "Apple Complex" is an open-ended growth story. When you start to imagine the potential of global penetration for this new generation of devices and services, you can get some pretty staggering numbers. That means we can use these stocks as bullish indicators.

So, Venezuelan president Hugo Chavez is offering to mediate some kind of peace for Muammar Qaddafi and Libya. That’s a bit like Ben Bernanke offering up a plan to fight inflation.

Stocks are poised to rally on the news and oil prices are dropping. Gold is even looking to reverse course.

Now, it's still early in the day. We've seen stocks reverse early gains and trade lower recently. But the strong early reaction to this news would seem to suggest that stocks want to push higher.

Richmond Fed president Lacker is out today saying he expects GDP growth to approach 4% this year, and as a result of stronger than expected growth, the Fed must re-evaluate its QE2 policy.

 

I am very curious to see how investors will react to the possibility that QE2 may be ending. The policy is set to conclude in June, anyway. And I would suspect that the Fed will continue until then, regardless of growth.

The correction we’ve been monitoring certainly picked up some steam on Friday. The rioting in Egypt gave investors an easy excuse to drive stocks sharply lower. And there should be no surprise that tech stocks and the Nasdaq bore the brunt of the selling.

Tech stocks were strong momentum trades in the last couple of months of 2010 and the first weeks of 2011. Then earnings seasons started. I can’t say that earnings expectations were too high – many of the top tech stocks, like Apple (Nasdaq:AAPL), IBM (NYSE:IBM), Intel (Nasdaq:INTC) and Qualcomm (Nasdaq:QCOM) beat expectations and offered solid guidance going forward.

Starting last week, we saw some of the market's biggest momentum trades sell-off on basically positive earnings reports. I'm referring to Apple (Nasdaq:AAPL), VMWare (NYSE:VMW), F5 Networks (Nasdaq:FFIV) and many of the other tech companies that are helping companies lower costs or are associated with the surge in handheld gadgetry.

But last night, Qualcomm (Nasdq:QCOM) reported good numbers and the stock is actually higher. NetFlix (Nasdaq:NFLX), too. Though not in the same sector, Caterpillar (NYSE:CAT) is also up after good numbers.

Could we be seeing a shift from the "sell first" mentality that emerged last week?

So far this earnings season, we are seeing a clear separation between two of the stock markets leading sectors Starting with Intel (Nasdaq:INTC) and continuing with Apple (Nasdaq:AAPL) and IBM (NYSE:IBM), technology earnings were fantastic in the fourth quarter.

But it should be clear that banks are still grappling with the loss of mortgage business and the fallout from the financial crisis. And quite simply, while the climate for banks has certainly improved, as a group, they are not going to return to the growth they enjoyed in the last decade anytime soon.

The stock market failed to build on the rally from Friday. The S&P 500 fell below support at 1,050 yesterday.

Right now, sentiment is just awful across the board. And we're heading into what's traditionally the worst two months of the year for stocks: September and October.

Volume in the stock market has been extremely light. This suggests that individual investors are not buying stocks. And we can see that in mutual fund flows. In July, bond funds attracted $25 billion dollars. And investors pulled $12 billion out of U.S. equity funds.

Small-cap stocks pushed lower on the opening, pressured by a sloppy batch of earnings reports this morning and another weak slate of economic reports that threatens to break a four-day winning streak for the market. At 10:02 a.m. ET, the Russell 2000 (NYSE:IWM) was down 11.00, or 2.32% at 462.03.

New home sales fell off a cliff today, sinking 14.7% to an annual rate of 331,000 units, way below the forecast of 400,000. The stock market appeared to extend the morning slide after the dreary home sales report.

The weekly claims report came in at 588,000, which was a tad higher than the forecast. The bleak news was on continuing claims, which rose to record highs at 4.77 million, topping the recessions from the 1970s and 1980s in the process. This was a sobering look at recent layoffs ahead of the big monthly employment report next week.

Also on the data front, the durable goods report came out at minus 2.5%, which was nominally worse than the projection for a decline of 2%. However, when stripping out the “big ticket” transportation orders, durables were off 3.6%. This marked the December report on durable goods; for the year, orders were down more than any year since 2001.

As for the latest earnings reports, Allstate Corp. (NYSE:ALL), QUALCOMM Inc. (Nasdaq:QCOM), Black and Decker Corp. (NYSE:BDK) and Fortune Brands Inc. (NYSE:FO) all posted various troubling numbers on profit reports, setting a bleak tone for the morning, just a day after investors were finding spots of good news on the profit front for buying enthusiasm.

Interestingly, all the bleak news on earnings and economic data shuttled aside excitement over the House passage of the Obama stimulus plan; but even before today’s data, the market was already lower, suggesting that the House passage wasn’t a surprise and that the market would need something fresh to . . .

Small-cap stocks threw a gasket in the final hour of trading Friday, giving back a lion’s share of Thursday’s stunning rally off new bear market lows while finishing with the lowest weekly close since August 2003. Slumping tech stocks, dreadful retail sales and a risk-averse mentality took a toll on a market that is starting to get a penchant for wicked afternoon volatility. The Russell 2000 (NYSE:IWM) closed down 34.71, or 7.07% at 456.52 and is now down 40% for 2008, while the Dow is off 36% for the year and the S&P 500 is down 41%.

Small caps entered the day on a mildly weak note, unable to graft higher on modest gains in Europe and Asia and seemingly not able to revive the manic bargain-hunter push from Thursday afternoon. A big part of the problem is that no matter how hard investors try to write off ugly economic data, at some point the blows wear down psychology, kind of like a fighter who’s been absorbing body shots for several rounds.

The latest stinger on the data front was this morning’s retail sales report, which posted the largest October decline on record (the series only dates back to 1992). The slide was 2.8%, well below the forecast for a decline of 1.5%, but perhaps a little closer to the “worst case” scenarios that were floating about. It doesn’t help matters that consumer spending appears to be falling off a cliff into the holiday season and a fresh batch of earnings reports from retail firms simply added to the spending worries.

The S&P Retail Index tumbled about 7% today as a recurring theme played out for stores that we all frequent from time to time – everything from apparel to home improvement to electronics – they all basically warned that forward projections were at risk as the U.S. economy lurches through the recession. Speaking of recession, eurozone economists beat the official U.S. designators to the punch by . . .

Small-cap stocks extended the morning rout into midday trading, pulled down by renewed worries about the economy following the worst decline in October retail sales on record, which only heightens fears about consumer spending moving into the key holiday season. At 2:16 p.m. ET, the Russell 2000 (NYSE:IWM) was down 4.29%, on target for the third-lowest daily close in more than five years and the lowest weekly close since August 2003 despite the dramatic recovery explosion from Thursday.

Energy and technology stocks were among the dominant drags on the market, with the Energy SPDR off nearly 5% and the tech-laden Nasdaq 100 down about 4.5%. Within the tech arena, anything tied to the cell phone business was getting hammered following Nokia’s warning that sales would fall far below expectations in coming months. Nokia Corporation (NYSE:NOK) was down 12%, Motorola Inc. (NYSE:MOT) was off 8% and QUALCOMM Inc. (Nasdaq:QCOM), the largest mobile phone chip maker, was down 6%.

Back on the commodities theme, crude oil prices were down about $1.60 a barrel, as worries about global demand persist. Despite the pullback on energy prices, commodities overall were hanging in there today, with the Commodity Research Bureau Index basically flat at mid-session. In general, commodities are way oversold and the U.S. dollar tone is mixed today (up versus euro, down versus yen).

As for retailers, today just isn’t pretty. The S&P Retail Index is down 6% and a host of name-brand companies released earnings today that were either disappointing, or even when solid for the third quarter reflected downward guidance for the coming quarter. Nordstrom Inc. (NYSE:JWN) was down 8%, JC Penney Company Inc. (NYSE:JCP) was down 9% and although the pain was intense for apparel oriented retailers, there was plenty of agony to go around; for instance, home improvement retailer . . .

Small-cap stocks remained higher into mid-session activity Wednesday, buoyed by a firm tone in technology and commodity stocks that helped counter continuing softness in the financial arena. At 12:50 p.m. ET, the Russell 2000 (NYSE:IWM) was up 7.97, or 1.13%, at 715.27.

Tech stocks gathered upside momentum following upbeat earnings results from Texas Instruments Inc. (NYSE:TXN), which spilled over in the chip arena, with QUALCOMM Inc. (Nasdaq:QCOM), rising 3.6% today. Also, Research in Motion Ltd. (Nasdaq:RIMM) rallied 4.3% as the maker of the Blackberry announced a new flip phone. In recent days, there have been concerns voiced that customers are less willing to spend for new technology and the latest high-end tech gadgets, so the improved tone today was a welcome relief — especially after Tuesday’s big stock market rout.

Commodity stocks continue to provide bullish momentum for small-caps today, even though crude oil prices reversed course and headed lower, slipping to fresh five-month lows. Even with crude oil back on the retreat, coal, steel, metals, gas utilities and oil exploration shares were among the best performing sectors on the market so far today. Even with commodities reflecting a better tone today, the U.S. dollar remained on a roll, charging to fresh 11-month highs against the euro, rising about 0.6% in the process. The greenback was also up nearly 1% versus the yen, . . .

Small-cap stocks are expected to open slightly lower, pulled down by a mixed tone on the earnings front and by soft economic data in the employment picture. The Russell 2000 (NYSE:IWM) was off about 0.3% in after-hours trading, which suggests an open near 717.00.

The weekly claims report came in well above analyst expectations, with the headline figure at 406,000 compared with a median forecast closer to 380,000. The immediate response to the number was a mild extension of the overnight dip in S&P 500 futures. The market will also get a chance to respond to existing home sales data later this morning at 10:00 a.m. ET.

Crude oil prices were up modestly ahead of the U.S. open, but did slip to seven-week lows overnight and have seen a dramatic $23-dollar-a-barrel freefall in recent days. The dollar saw a big rally Wednesday, but was narrowly mixed this morning and pulled back after the weekly claims figure.

On the earnings front, there were several big-name companies out with results this morning, but the returns were mixed and investors did not appear to latch . . .

Consumers are cutting the cord, severing the tether to the landlines that once were mandated to talk to the world. No longer are they feeling beholdin’ to AT&T Inc. (NYSE:T), Verizon Communications Inc. (NYSE:VZ) or any of the other traditional providers of Plain Old Telephone Service.

Viva la revolution cellular.

Admittedly, wireless services are not without shortcomings. Dropped calls are not completely a thing of the past, but recent technology developments, combined with a network buildout by the carriers, are making strides in minimizing callus interruptus.

One of the hotter technologies under development is known as “femtocell,” and an 8-year-old Massachusetts company, Airvana Inc. (Nasdaq:AIRV), is working to help take it mainstream. Think of it as something akin to a cell tower of your very own: rather than depending on an outside signal that might fade inside a building, the femtocell is a small base station that delivers cellular communication over a broadband Internet connection. Adding range in the home to the home on the range — or in the condo complex — could help popularize 3G wireless services in the important U.S. market.

Airvana has a portfolio of network infrastructure products based on Internet Protocol technology, which provides the missing link between wireless service . . .

Shares of China TechFaith Wireless Communication Technology Ltd. (Nasdaq: CNTF) are skyrocketing after Qualcomm Inc. (Nasdaq: QCOM) said it has granted China TechFaith’s subsidiary, TechFaith Wireless Technology Group Ltd., a royalty-bearing, worldwide license under Qualcomm's patent portfolio to develop, manufacture and sell 3G subscriber units and modem cards that implement WCDMA and TD-SCDMA standards.

TechFaith will pay royalties at Qualcomm's standard worldwide rates and said they will be the same regardless of the CDMA standard implemented by the subscriber unit or modem card.

“We are experiencing increased momentum in the worldwide transition from 2G to 3G mobile services,” Marvin Blecker, president of Qualcomm Technology Licensing said in a press release. “The expansion of TechFaith's licenses from Qualcomm to including these additional 3G CDMA technologies will ensure that they remain highly competitive in the global market by offering advanced wireless handsets and modem cards to customers throughout the world.”

China TechFaith, based in China, is an original design manufacturer focused on research and development of cell phone solutions.

Shares of China TechFaith (CNTF) rose 30.05%, or $2.01, to $8.70 at 11:33 a.m. ET.