The market ended the day essentially flat, which was not bad at all considering the huge gains earlier this week and a worse-than-expected Non-farm payroll report early this morning. For the week, the Dow rose almost 400 points, or 3.2%, with nearly all the advance coming on Tuesday. The S&P 500 gained 4.2% in the week to 1370, the biggest weekly gain in 2 months. The Nasdaq, which had its best week in more than 2 years, gained almost 5% and finished the week at 2370. Other major indices are doing equally well if not better. For example, the Dow Transportation Average advanced 4.7% for the week and is now almost 25% higher than the lows reached in January 22nd. 
All eyes were on the monthly Non-farm payrolls report this morning. Some investors had hoped for a positive surprise which might take the Dow right through the key resistance of 12750. Interestingly, the Dow futures were up almost 100 points and just inches away from that resistance level seconds before the report was released. But such a hope was quickly evaporated. The Non-farm payrolls declined by 80K vs. a drop of 50K expected. Also, the previous two months’ payrolls were revised lower: January’s was revised to -76K from -23K and February’s was revised to -76K from -63K. In the meantime, the unemployment rate jumped to 5.1% from 4.8% and it was the second time this year that we saw a 0.3% month-over-month jump in the unemployment rate. The news immediately sent equity futures lower and bond prices higher. As the job report usually acts as a lagging indicator, it should come as no surprise if we see the unemployment rate climb higher in the next few months. On the other hand, it also gives the Fed more room to keep an accommodative monetary policy. 
Commodities especially basic materials continued to outperform the broad market. Financials were under some pressure as investors were worried that the first quarter earnings result may not look good. The US dollar was lower against most major currencies as traders increased their bets of a 50bps cut in the Fed’s next meeting late this month. Treasuries rallied across the board and the yield curve continued to flatten. As for the coming week, Alcoa will officially kick off the earnings season on Monday and it will be a relatively quiet week in terms of economic news.  

It has been a while that we see the market behave in such a quiet way. The Dow was swinging between plus 0.5% and minus 0.5% for the whole day and closed the day modestly up. We did get some mixed economic news but the spotlight of the day was in Washington, where the Fed Chairman and other officials testified before the Senate Banking Committee regarding the Bear Stearns collapse.  
The weekly jobless claims came much worse than expected. Economists expected a reading of 365k but the actually number was 407K, the highest since Sep 2005. Also, the continuing claims jumped 97K to 2.94 million. It seems that last week’s surprising drop in weekly claims was an outlier and the job market needs more time before it can find a bottom. Although today’s worse-than-expected jobless claims didn’t have an immediate effect on tomorrow’s Non-farm payrolls report as the latter doesn’t include today’s data, it nonetheless will have an impact on the payroll reports for the next few months. Separately, we got a better reading on the Non-Manufacturing ISM report for March. The index came at 49.6, still indicating a contraction but better than consensus of 48.5. Among its components, the Business Activity was 52.5 compared to 50.8 in February while New Orders were 50.2 vs. 49.6. It is worth noting that the Price Index increased to 70.8 vs. 67.9, indicating inflation pressure is not ebbing despite a slow down in broad economy. 
Commodities especially basic materials were doing well in today’s session. Financials were initially weak but turned higher after Merrill CEO indicated the firm had no plans of raising new capital. Similar to the equity market, there was little movement in the currency, treasury and commodity markets although several commodities did hit new historical highs. One final note: spreads between treasuries and average high-yield bonds narrowed over 100bps during the past two weeks, which may indicate a return to normal in the credit market.

The market held up pretty well following yesterday’s huge rally. All three major indices posted a loss but the decline was limited to less than half of a percent. The news on the economic front was mixed and Bernanke mentioned “recession” for the first time at the Fed Chairman position.
Start with the monthly ADP report, which is often used as a proxy for the more important Non-farm payroll report on Friday. Although ADP includes only private employment and its records of predicting the Non-farm Payrolls in the past are quite mixed, investors still treat it as a market mover. Economists predicted a drop of 45K in the ADP report and instead, it showed an increase of 8K. The news immediately sent stock futures higher and bond prices lower. Separately, the Factory Orders for February dropped more than expected. Economists predicted a fall of 0.8% following a drop of 2.5% in January and instead, it dropped 1.3%. Then we had the testimony by Bernanke on the economic outlook. The Fed Chairman mentioned a possible “recession” before the Joint Economic Committee. We have watched all testimonies by the Fed Chairman since last August and this was the first time he referred to a “recession”. To be more accurate, he used a “C” word – “contraction” in today’s testimony but he did indicate that a recession cannot be ruled out. Like previous testimonies, he still predicted a recovery in the second half of 2008 although he emphasized that the economy probably wouldn’t return to normal growth trend until 2009. The market shrugged off the Chairman’s recession comments as it was quite clear by now that the growth in the first quarter would be close to zero if not negative.
While equities took a pause, commodities had a good day. The CRB commodity index jumped 1.7% led by energy and precious metals. Oil jumped almost 4% despite a huge build-up in the weekly inventory. The US dollar was mixed against major currencies. Treasuries continued to trend lower and the yield curve was flattened as investors see less probabilities of 50 bps cut at the next Fed meeting. As we are approaching the first quarter earnings season, earning results and guidance will be critical for the market moving forward.

The market started the new quarter in a way we haven’t seen for 70 years. All three major indices posted a gain of better than 3%. According to Bloomberg, it is the best start for the second quarter since 1938. Actually today’s rally was so huge that some traders started to wonder whether it was simply an April fools’ joke.
Ironically, it was UBS’ record write-down that triggered today’s huge rally. The biggest European bank announced earlier that it would make a further write-down of $19 billion following the collapse of the US sub-prime mortgage market. The news initially sent its stock price to drop more than 7% in early trading in Europe. But investors then started to realize that with today’s huge write-down, the worst is probably over so they pushed its stock price higher. At the end of the day, the stock went from a loss of more than 7% to a gain of 12% - a remarkable reversal. The US financial firms benefited nicely from the UBS reversal and became leaders in today’s broad rally. The economic news of the day also gave a boost to today’s rally. The ISM manufacturing index came at 48.6, still below 50 but better than 47.5 expected. Within the ISM survey, new orders decreased to 46.5, the lowest since Oct 2001 and production fell to 48.7. But the index got some help from exports and employment, which climbed to 56.5 and 49.2 respectively. Separately, the Construction Spending decreased 0.3% in February, also better than consensus that calls for a drop of 0.9%.
Even with today’s rally, the market is still down more than 6% for the year and almost 14% from the peak reached last October. As today is the first day of the new quarter, it is quite likely there is some rebalancing going on among various asset classes. Both treasuries and commodities, two biggest winners during Q1, were sold off while the US dollar recouped some losses from the previous quarter. The Fed Chairman Bernanke is going to give his economic outlook tomorrow and the market will listen carefully to what he is going to say.   

The market ended the first quarter on a relatively quiet fashion. All three major indices posted modest gains but the volume was very light. Despite today’s gain, the S&P 500 still ended the month lower by around half of a percent, extending its losing streak to five consecutive months - the longest since 1990. As for the quarter, the index posted a decline of 9.9%, the biggest since 2002.
It was a light day in terms of economic news. The Chicago PMI came at 48.2, better than 46.0 expected. But investors didn’t seem to pay much attention to the regional manufacturing report and tomorrow we are going to get the national ISM index, which can be a potential market mover. Separately, Treasury Secretary Paulson made a speech at 10am proposing his plan that calls for larger oversight role for the Federal Reserve, the merging of the SEC with the CFTC, a federal charter for insurance companies and the closure of the Office of Thrift Supervision. Although this was probably the largest regulation change in the financial industry since the Great Depression, investors soon realized it would take quite a few years to implement such a plan assuming it can get all the legislative approvals so any near-term impact would be minimal.
Just like last Friday, we didn’t read too much into today’s action due to possible quarter-end window dressing. For the quarter, none of the 10 major sectors posted a gain. On the loser’s list, tech, financials and health care took the top three positions. Many overseas markets fared even worse than the US market. In Asia, both Nikkei 225 Average and the Hang Seng Index lost 18%. In Europe, the FTSE100 posted a loss of 12% while the DAX declined 19%. Treasuries and commodities were among the biggest winners for the quarter. For example, the yields on the 2-year T-bill dropped 125bps while the yields on the 10-year notes decreased 60bps. The CRB commodity index closed the quarter at 386.89, up around 6% despite a pull-back in today’s trading. Many individual commodities did much better than the index suggested. Natural gas, for instance, posted a gain of more than 30% for the quarter.