The market ended the day mixed with light volume. For the week, all three major indices moved modestly higher and closed at the best level in more than 3 months. The Dow Transportation Average continued to outperform the broad market --- it gained 1.2% for the day, bringing its total year-to-date gain to 12% compared with a 4.8% drop in the S&P 500 index. The economic news of the day was quite negative. The US consumer sentiment index fell more than expected in April to 62.6, the lowest in 26 years. Earnings continued to be the driving forces behind today’s market action. Microsoft’s disappointing guidance weighed heavily on technologies throughout the day while a better-than-expected earnings report from American Express gave financials a boost.
Other than financials, commodities were also among the noticeable winners as the CRB commodity index reversed its loss in the previous two days and ended the day higher by 0.7%. But taking a closer look, one can find that it is really the strength in energies that offset weakness seen in agricultures and industrial metals. The US dollar continued to move higher against most major currencies as traders trimmed their bets for the interest rate cut on April 30th. Treasuries were again sold off sharply, which was partly caused by strength in equities and partly caused by activities in Japan. Overnight, Japanese bond prices tumbled as traders feared that its central bank may soon increase the overnight interest rate due to inflation concerns. In fact, the price drop was so dramatic that the Tokyo Stock Exchange was forced to order a 15-minute halt in trading. As for next week, the biggest event is certainly the Fed interest rate decision on Wednesday. Currently the market believes there is a 25% chance that the Fed will keep the rate steady.

The market advanced for the second day in a row. The Nasdaq again became the top performer among the big three and posted a 1% gain. We got some mixed economic news: On the positive side, weekly jobless claims unexpectedly dropped 33K from the previous week while economists expected no change. In addition, the continuing claims also dropped 65K from the previous week and came at 2.934 million. In a separate report, orders for durable goods excluding transportation rose a greater-than-expected 1.5% in March while the headline number of negative 0.3% was slightly below consensus. On the flip side, the New Home sales for March plunged 8.5% to 526K, the lowest in 17 years. Meanwhile, the most pessimistic economist called for a drop to 560K. The median price dropped 13.3% year-over-year, the most in almost four decades. But generally positive earnings results along with strength in the US dollar provided much support to today’s rally.
There was clearly some sector rotation ongoing in today’s market. Money was moving out of previously hot commodities and piling into mostly abandoned financials. The CRB commodity index dropped 1.7% while the US dollar enjoyed its best day against the euro since last December. Treasuries were sold off sharply across the yield curve as traders trimmed their bets for the interest rate cut next week. Currently they bet with 80% chance of a quarter cut with the balance calling for no cut. After the bell, Microsoft issued a cautious guidance for the next quarter while American Express handily beat expectations.

All three major indices ended the day modestly higher. The Nasdaq, which fared worst yesterday, advanced 1.2% and was the best performer among the big three. It was a very light day in terms of scheduled economic news. Bond insurer Ambac reported a much larger than expected loss and the stock lost more than 40% as a result. But most other earnings reports were exceeding expectations, which was the main reason behind today’s modest gain. 
Financials were again among the noticeable losers for the day following the freefall in Ambac share price. Technologies, on the other hand, outperformed the broad market mainly due to strength seen in the semi sector. The CRB commodity index closed the day essentially flat. Weaknesses in agricultures and precious metals were mainly offset by strengths in energies and industrial metals. The US dollar was strengthened against most major currencies while the treasuries were sold off slightly. Overnight, China cut the tax on share trading by two thirds trying to support the domestic A-share market, which has dropped by almost 50% from its peak reached last October. Will this trigger the much anticipated Olympic rally? It will be interesting to watch.

All three major indices ended the session lower. The Nasdaq, hit by a disappointing earnings guidance from TI, fared the worst and posted a loss of 1.3%. But it was really the record high oil price that pressured the market for most of the day. Ironically, an incredible $100 oil price looks like a bargain now. The Existing Homes Sales report, which was the only economic news of the day, showed no sign of bottom in the US housing market with sales declining by 2% and price dropping by 7.7%.  
With oil marching towards $120 per barrel, energies were among the best performers for the day. Not surprisingly, transportations were among the biggest losers. The Amex Airline Index dropped 12.4% today with many airlines hitting fresh multi-year lows. The CRB commodity index hit a new record high led by energies and agricultures. The Fed is going to have a tough time next week in determining the key interest rate given the continuous tightness in certain credit markets and the record high oil prices. The US dollar was lower against most major currencies while treasuries were sold off slightly. Clearly, the market is going to face more headwinds in the months ahead, but one thing that may come to rescue is time --- it takes time for monetary and fiscal policies to work.

The market started the new week in a quiet fashion. All three major indices ended the day within 0.2% from the unchanged level, which was not bad at all considering the huge rally in the previous week. There is little economic news. Similar to Citigroup and Wachovia, the latest earnings results from Bank of America also missed expectation. But apparently the market has already discounted the news.
Financials were among the noticeable losers for the day but volume was on the light side. Commodities especially energies continued to do well despite a pull back in the CRB commodity index. It is worth noting that the crude oil price has managed to keep hitting new historical levels. If this pattern doesn’t change, inflation will replace the credit crisis to become the top concern for the Fed pretty soon. Treasuries were mixed and the yield curve became flattened a little bit. The US dollar closed lower against most major currencies. After the bell, TI provided a disappointing guidance for the next quarter and it should remind investors that the economy is not out of the woods yet.