• Stock markets rose steadily during the day, with the Dow leading the way.
• Oil stocks were seeing past the current glut, and bank stocks, past the Fed.
• The confidence is still very fragile in the markets this morning

Having prepared as best they could for any decision by the Federal Reserve later this week, stocks staged a rally yesterday, this time led by the Dow Jones.

The Dow, which has been trailing the S&P 500 and the NASDAQ for most of the year, rose 228.89, 1.49% to finish Tuesday at 16,600. The other averages were also up, just not as much. The S&P was up 25.06, 1.28%, to finish at 1,978, while the NASDAQ gained 54.76, or 1.14%, to finish at 4,860. Ignored was a report that industrial production fell in August, a sign the strong dollar is hurting the manufacturing sector.

The gains helped offset a horrible day in China, where the Shanghai index dropped 3.65%, so that it is now down to levels last seen in December, 2013. The Hang Seng index was down 0.5%, the Japanese Nikkei was up 0.35%, and Mumbai's Sensex was down 0.59%.

The trading day was better in Europe, where the German DAX was up 0.56%, the English FTSE average was up 0.87%, French CAC-40 was up 1.13% Even the Mexican and Brazilian markets managed to eke out gains.

Looking Beyond the Horizon - Chevron Gets An Upgrade

It would seem that many traders are now looking beyond the decision on interest rates, and even looking beyond the current oil glut. Chevron (NYSE:CVX), for instance, shot up 1.85%, $1.40/share, on what seemed to be a simple upgrade from JP Morgan (NYSE:JPM) analysts, giving it an overweight rating based in part on its success in maintaining its dividend throughout the downturn.

Morgan now thinks that Chevron will be able to get into liquefied natural gas export next year, that it will manage to have positive free cash flow next year, and that it has managed to cut costs.

That seems to be a “Gloria Gaynor” view in the oil-patch, the idea being “I will survive.” Bank lending windows may be shut, other companies may be forced to merge at bad terms, but those companies that survive will see many bargains and rising prices.

A Big Day for Big Banks Stocks

It was a big day for the biggest banks, especially the investment banks, with Goldman Sachs (NYSE:GS) rising 1.95% to $187.52, JP Morgan (NYSE:JPM) rising 1.92% to $63.58, and Citigroup (NYSE:C) rising 2% to $52. If Europe needs to end austerity the big American banks are in fine capital position, the thinking goes, and their domestic business looks strong as well.

It was not quite as good a day for the more commercial banks, but it wasn’t bad, either. Wells Fargo (NYSE:WFC) gained just 1.35%, Capital One (NYSE:COF) was up just 0.79%, Regions Financial (NYSE:RF) up just 1.46% and Comerica (NYSE:CMA) was up 1.6%.

What about Tech Stocks?

Big technology companies also moved up, albeit sedately. Apple (NASDAQ:AAPL) was up 0.87% to $116.28, Microsoft (NASDAQ:MSFT) was up 2.18% to $43.98, Amazon (NASDAQ:AMZN) finished up 0.19% to $522.37, Google (NASDAQ:GOOG) up 1.93% to $665.07 and even IBM (NASDAQ:IBM) was up 1.29% to $147.53.

All these companies are below their highs for the year, but they are all getting closer to them, with Amazon less than 3% away, and Google not far behind.

So What Happens In The Markets This Morning?

Rather than fearing China, I suspect U.S. traders are looking for encouragement from Europe, where economies are recovering and where austerity policies that held back growth previously, seem doomed under the continuing move of Syrian war victims into the continent. Jean Monnet, the founder of what has become the European Union, famously said that crises were opportunities and there is now hope that this may indeed be the case.

But be warned. That confidence is fragile. A really bad day in China, or the Middle East, could easily turn the sweet mood of yesterday afternoon into a bitter hangover later today.