Change in Washington That's Positive for Wall Street

The three most important players in the debt debate all softened their tone in public speeches yesterday:

Most notably, Speaker John Boehner refrained from mentioning health care. Instead he focused on entitlement spending, something President Obama and Senate democrats agree requires a reform. Granted, the Speaker rejected the President's request to pass a budget prior to budget negotiations, but we think this tactic is simply part of the negotiating dance. Bottom line, the tone has softened among all the key players. This is good.

Equally important is the likely nomination of Janet Yellen to succeed Ben Bernanke as chairman of the Federal Reserve. The announcement telegraphs a desire by the White House to move forward with the business of governing. Her nomination also provides a "shot of adrenaline" according to Adrian Miller, a strategist at GMP. Yellen is dovish on inflation and will likely maintain the current bond-buying program.

These welcome developments come as the S&P 500 Index has fallen 4 percent from its high on Sept. 18, having broken through its one-year support line yesterday.

While we'd prefer to see the S&P 500 Index above its support line, the changes in Washington carry greater weight than the technical. Strategist Paul Hickey of www.bespokeinvest.com, thinks so. His morning note focuses very specifically on high quality companies whose stocks have recently become oversold. He does not advocate "buying the market." He does advocate considering these select few.

Attentive blog readers will recall we've done a little shopping list research of our own:

--Oct. 7: Stocks with most upside and no sell ratings.

--Sept. 30: Companies with rising cash flow this year and earnings forecasts next

--Sept. 26: Stocks with the highest Betas

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