Equity markets have made strong gains this morning, led by financial names in a situation reminiscent of the start of the current rally back in early March. Bullish Q1 preliminary results from Wells Fargo only reinforced optimism that no banks under examination have failed the government's stress test, and that has served as the major catalyst. Note that March same-store sales showed little improvement, with Wal-Mart missing consensus estimates. A flurry of rumors has blown across trading desks all morning, with pre-market reports of a Kuwaiti offer for Textron the biggest of the bunch. Front-month crude has returned to the strength seen earlier in the week, rising more than $2.50 to just below $52 as it continues to find traction post yesterday's inventory results.

- Treasury prices are moving lower on the back of firmer stock prices. The 10-year yield is back above 2.9%, but prices have been bid up some following the $18B 10-year reopening results that were announced early due to the pending Easter holiday. GILT prices have rallied after the BoE announced the next leg of purchases under their quantitative easing program. Before the NY open the BoE also left rates unchanged and indicated they did not plan to extend the plan to buyback GILTS at this time.

- A month ago, Citi, JP Morgan and Bank of America sent indices higher after making positive comments on their first quarter performance. Today Wells Fargo offered a Q1 earnings forecast that was double the consensus estimates and a revenue number $1B higher than expected. WFC's CFO said strength in traditional banking businesses, strong capital markets activities and exceptionally strong mortgage banking results were behind the improved forecast. In a CNBC interview, he said the bank was “a lot closer to bottom.” Adding to the positive glow, a Fox-Pitt analyst said Citi has an "increased probability of survival." Note that the WSJ offered cautious comments on Morgan Stanley's bond business. Due to the accounting treatments of some bonds issued by the bank before the financial crisis started, it is expected to take a hit of $1.2-1.7B when it reports quarterly results later this month, a bit higher than the $500M-$1B mark that many analysts are predicting from the bond-price move. WFC is up 25%, but off its best levels, while BAC is up 20%, JPM+13%, C+9%, MS+6% and GS+4%.

- Overnight Agence France-Presse picked up on a story in Kuwait's Al-Watan newspaper overnight that a UAE-Kuwait consortium may bid $21/share for Textron, valuing the conglomerate at over $5B. The company later said they could not confirm or deny any buyout offer for the company. UBS threw cold water on the repots, calling the deal "extremely unlikely." A Citigroup analyst commented on the Textron takeover speculation, says Boeing and UTX might be interested in TXT's Bell Helicopter unit, noting that TXT worth $15+ in a takeover scenario. Various rumors earlier this month named Lockheed Martin as potential bidder for Textron.

- Profit guidance from various small- and mid-cap firms is offering a positive spin on earnings season. California Pizza Kitchen doubled its Q1 earnings guidance while retailer Charlotte Russe said it would be in the black in Q2 (analysts expect a $0.19 loss). Cash America upped its view of Q1 and reaffirmed its full-year forecast noting better results in its pawn lending operations and online cash advance offerings. Control systems manufacturer Moog offered a downbeat assessment, cutting its full-year earnings and revenue outlook considerably, citing the dramatic slowdown in orders for its industrial products and anticipated reductions in commercial airplane deliveries.

- In currencies, the greenback has gone bid in the late NY morning after trading lower on the better risk appetite for much of the European session. The EUR/USD has slid through .1.32 to after Citigroup made cautious comments ahead of the NY open. The note suggested the euro could sink towards 1.2750 by early next week due to liquidity concerns around the Easter holiday. Cable is down 100 pips approaching 1.46 while USD/CHF is near session highs, up more than 110 pips at 1.1580.

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