After a slow start, the Dow go it in gear and staged another nice rally today. Once again it was the financials that led the way depite a couple of key downgrades in the sector. It wasn’t pretty though.

The market looked lost when trading opened and the downgrades on Morgan Stanley (MS, $23.81, up $0.77) and Goldman Sachs (GS, $98.99, up $5.09) didn’t help. At one point, the financials were down 2.5% as Morgan reached a low of $21.77 while Goldman dipped to $92.55.

Wall Street analysts downgraded shares of Goldman and Morgan, saying their recent run-up is overdone. However, in the afternoon, an analyst out of Oppenheimer initiated coverage of both companies with an “Outperform” rating. That helped the financials rebound as the analyst believes that “investment banking is poised to recover from the economic slump before commercial banking.”

I never pay attention to upgrades and downgrades but they do move stocks. The problem with the financial sector is that I don’t believe Wall Street really knows what kind of earnings these firms are going to report. The analysts that are downgrading the financial stocks want to look smart in case they pull back while the analysts who are upgrading them want to say that they told us there was more room to run in these stocks.

In any case, the market rallied and was strong going into the closing bell. The Dow finished the session at 7,395, up 178, or 2.5%. The Nasdaq soared 4.1%, or 58 points, to close at 1,462 while the S&P 500 chipped in with a 3.2% gain, or 24 points, and ended the day at 778.

Naturally, the big debate right now is “the bounce” and everybody has an opinion on how much of a bounce we are going to get or how long the market can rally. It’s hard enough to predict the market day-to-day but to make a call on either one of those questions is impossible to answer. So don’t worry about it.

We know this is a trader’s market and the art of stock picking has gone to the wayside. There are still so many moving parts that all we can do is play the trend. Right now that trend seems to be up.

Rick Rouse