By Greg Peel

The Dow closed up 33 points or 0.2% while the S&P gained 0.3% to 1694 and the Nasdaq added 0.4%.

There was bullishness in the air on Bridge Street yesterday as the index picked up momentum over the session to close on its highs for the second day running, despite a weak business confidence report from NAB. Strong iron ore prices have supported recent moves although yesterday's gains were widespread across the sectors, with healthcare the star and utilities the laggard. The move was supported by a slightly weaker Aussie but defied a weaker Wall Street.

Wall Street closed higher last night nevertheless, breaking a three-day losing streak.

Apple is back in focus not just because it plans to launch yet another iPhone variation next month, but because billionaire investor Carl Icahn revealed last night he had taken a large stake in the company. Apple shares rose nearly 5% and helped the Nasdaq to a 0.4% gain. It was otherwise a rollercoaster ride for the other indices.

Wall Street opened lower, continuing the theme of the past few sessions, and was down 77 Dow points at 11am. It then rallied to be up 84 points at lunchtime before drifting back to the close. The economic news of the day was the July retail sales release.

Sales rose 0.2% in July, which looks a little sluggish and missed 0.3% forecasts. However lumpy auto sales spiked in May and June and fell back in July, and ex-autos July's result was a 0.5% gain against 0.4% expectations. And June's headline number was revised up to 0.6% from 0.4%. July ex-autos has proven the strongest gain this year.

The pace of US economic recovery has become difficult for Wall Street to nail down. The July manufacturing PMI was strong, but jobs disappointed. Now retail sales are strong. The lack of clarity has led to even more confusion over Fed tapering and the timing thereof. Hence it was perhaps timely that the Atlanta Fed president threw his two bobs' worth in last night.

The uneven performance of the US economy has made it impossible for the Fed to be as clear as Wall Street would like with regard policy, Dennis Lockhart suggested. There will not have been enough data by the September meeting to allow the central bank to commit to "a full phase-out of asset purchases" or a precise timetable for winding them down, he said. He believes that any decision to proceed, "whether it is September, October or December", should be a cautious first step.

Lockhart is considered a pragmatist and generally a "voice of consensus" on Fed thinking, despite not being an FOMC member. Last night he provided a little bit for everyone. On the one hand, he put paid to any idea of rapid QE3 withdrawal, given he cannot see a timetable being committed to at this point. On the other hand, he all but confirmed likely tapering before year-end, albeit probably in baby steps.

This is somewhat of a middle ground between those suggesting "Bring it on! Tapering means the US economy is strong!" and those believing it will be all over Red Rover the minute the Fed withdraws the first sugar pill. It's a little bit "Goldilocks", hence a wary but positive US stock market. The real response was notable, nevertheless, in the US bond market. The ten-year Treasury yield jumped 11 basis points to 2.72%, just shy of the 2.76% high since tapering talk began.

The US dollar responded accordingly, rising 0.4% to 81.75 on its index, allowing the Aussie to fall back 0.4% to US$0.9110. Gold was the victim, falling US$13.70 to US$1321.70/oz.

Base metals are caught between a stronger looking China and the prospects of a dollar rally, and closed mixed last night on small moves. The oils defied the dollar, with Brent up US85c to US$109.82/bbl and West Texas up US41c to US$106.52/bbl. Expectations of lower weekly US inventories helped WTI gain, while the ongoing industrial dispute in Libya is supporting Brent prices.

It's onward, ever upward for spot iron ore at the moment, with another US$3.10 gain to US$141.80/t. Spikes upward like this become a bit worrisome, because we know what must inevitably follow eventually.

The SPI Overnight rose 17 points or 0.3%.

The eurozone will release its June quarter GDP result tonight. Ahead of that, it's the Australian consumer's turn to mope today with the release of Westpac's confidence report. And it's a very big day for earnings releases.

Top of the pops today is CommBank ((CBA)), with all eyes on the dividend. CSL ((CSL)) is in the mix, as is Leighton ((LEI)), OZ Minerals ((OZL)), Wesfarmers ((WES)) and WorleyParsons ((WOR)), just to name a few. And Primary Healthcare ((PRY)) gets to show why its shares shot up yesterday.

Rudi will appear on Sky Business at 5.30pm.

NOTE FROM THE EDITOR

Economic data have started to surprise on the upside, including recent PMI surveys and Chinese indicators. This has prompted suggestions from the more optimistic forecasters that global growth is looking in much better shape for the second half of the calendar year. If correct then the recent switch into resources stocks will have further to run.

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