LOWER BOND YIELDS BOOST MARKET -- RATE- SENSITIVE STOCKS GAIN THE MOST -- MID-CAP INDEX CHALLENGES 2005 HIGH

BOND YIELDS RESUME DECLINE ... Last week the yields on the 10-year T-note fell below 4% to the lowest level in a year. That gave a boost to the stock market and especially to stocks tied to interest rates. After bouncing back to the 4% level on Monday, yields are falling again today thanks to Mr. Greenspan's comments that he didn't expect long-term rates to begin rising anytime soon. That helped ignite an impressive stock rally in today's trading. Rate sensitive stocks are once again leading the day's advance. Indexes tied to homebuilders, REITS, and utilities are hitting new highs. An index tied to midcaps is already challenging its 2005 high. Large caps appear headed in that direction.

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MID CAP INDEX CHALLENGING 2005 HIGH ... It's normally a good sign for the market when smaller stocks are leading it higher -- as they are now. This time, however, the big leaders are in the mid-cap area. Chart 5 shows the S&P 400 Mid Cap Index already challenging its March high near 683. If it gets through that barrier, that should increase the odds for the S&P 500 Large Cap Index (Chart 6) to reach its March high as well. MORE LATER.

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