The market continued to advance on Friday with all three major indexes closing the session higher by more than 1.5%. However, both the Dow and S&P 500 finished the week modestly lower while the Nasdaq extended its winning streak to a seventh week. The Fed, as expected, released methodology for the stress tests that apply to the nation’s 19 largest financial institutions. In a 21-page document released at 2pm, the Fed concluded that “Most US banking organizations currently have capital levels well in excess of the amounts required to be well capitalized.” But it also mentioned that “Losses associated with the deepening recession and financial market turmoil have substantially reduced the capital of some banks.” In other words, most banks will receive a passing grade when the results are published on May 4th. Among the 19 firms, some regional banks including Regions Financial and Fifth Third Bancorp may be subject to further capital injection. Both failed to rally today along with the broad market.
We are almost half-way through the earnings season for the first quarter. So far, companies that report better-than-expected results are rewarded while companies with disappointing results are not necessarily punished, which shows investors are more comfortable about the future prospect of the economy. Several Dow components, including Microsoft, Amex, and 3M, reported their results after yesterday’s close. Both Microsoft and Amex beat or matched consensus and their share prices rose at least 10% in today’s trading. 3M, on the other hand, came worse than expected but its share price still managed to close higher by more than 5% after a lower open this morning. The company did say it foresees the US economy bottoming between the end of the second quarter and the third quarter.  
Let’s take a look at the three key indicators: 1. VIX: closed at 36.82 compared to 37.15 yesterday; 2. The euro/yen cross: closed at 129 compared to 128 yesterday; 3. The TED spread: closed at 98 bps compared to 100 bps yesterday.
All 10 major sectors finished the session higher led by basic material and energy. The CRB commodity index rose 1.5%. The US dollar was lower against most major currencies. Treasuries declined across the yield curve. The three-month US LIBOR dropped 2 bps to 107 bps, the lowest in 2009. The VIX index was little changed. The market breath was positive on both NYSE and Nasdaq. The volume was heavier compared to yesterday.

The market rallied modestly on Thursday after posting a mixed result yesterday. It is not surprising that investors are hesitant ahead of tomorrow’s release of the stress tests methodology. Although the final results of the stress tests won’t be available until May 4th, smart investors will figure out who needs extra help almost the moment that the methodology is published. In short, tomorrow could be a real test for some banks. Money has flowed out of the equity market for most of the past one and a half years, but the tide seems to turn recently. According to State Street Global Advisors, which tracks buying and selling in the $12 trillion in assets it holds as custodian, said on April 17th that flows into U.S. equities were close to the highest they have been in 12 years. On the retail side, the speed that mutual fund holders pull out their money also appears to slow quite a bit compared to February and early March. But it remains to see whether that’s a positive or contrary signal.
Let’s take a look at the three key indicators: 1. VIX: closed at 37.15 compared to 38.10 yesterday; 2. The euro/yen cross: closed at 128 compared to 127 yesterday; 3. The TED spread: closed at 100 bps compared to 96 bps yesterday.
Most major sectors finished the session higher led by financial and energy. The CRB commodity index rose 0.4%. The US dollar was lower against most major currencies. Treasuries rallied across the yield curve. The three-month US LIBOR dropped 1 bps to 109 bps. The VIX index declined 1 point. The market breath was positive on both NYSE and Nasdaq. The volume was lighter compared to yesterday.

Market comments are omitted due to conflict of travel schedule.

All three major indexes posted solid gains following yesterday’s sharp sell-off. Banks, which were among yesterday’s worst performers, led the market higher after Treasury Secretary Timothy Geithner indicated the “vast majority” of the nation’s banks would pass the “stress tests”. The results of the “stress tests” are expected to be released on May 4th while the methodology will be published this Friday. The government officials face a self-made dilemma in releasing the results. On one hand, if some of the nation’s biggest banks fail to pass the test, investors are going to lose confidence in the banking system and any hope in economic recovery will be delayed. On the other hand, if all banks pass the test, investors will question the credibility of the so-called “stress tests” and will have doubt in the true health of the banking system. Such concerns are causing extra volatility in bank shares these days. According to the Associated Press, regional banks may become the victims of the “stress tests”. In a Fed document obtained by the AP, the “stress tests” emphasize more on loans than other troubled assets, which are sitting on most money center banks such as Citigroup and BankOfAmerica. Regional banks, on the other hand, have their balance sheets consists of mostly loans.      
Let’s take a look at the three key indicators: 1. VIX: closed at 37.14 compared to 39.18 yesterday; 2. The euro/yen cross: closed at 127 compared to 127 yesterday; 3. The TED spread: closed at 96 bps compared to 98 bps yesterday.
Most major sectors finished the session higher led by financial and transportation. The CRB commodity index rose 0.6%. The US dollar was lower against most major currencies. Treasuries declined with the yield curve steepened. The three-month US LIBOR was unchanged. The VIX index declined 2 points. The market breath was positive on both NYSE and Nasdaq. The volume was heavier compared to yesterday.

The market posted its biggest loss in nearly two months after a string of six consecutive weeks’ gains. Renewed worries over bank credit losses were the main reason behind today’s sharp sell off. At close, all three major indexes lost over 3.5%. Ironically, the latest worries regarding the financial sector came after the earnings results from Bank of America, which like his peers reported much-better-than-expected profits for the first quarter. However, investors focused on its provision for credit losses, which increased to $13.38 billion compared to $8.54 billion in the previous quarter. The increase in loss provision brings the total allowance of loan and lease losses to over $29 billion, or 3% of the net loan and lease losses. Although the increase in allowance can be reversed if economy turns out to be better than expected, investors nonetheless used it as an opportunity to book profits.     
Let’s take a look at the three key indicators: 1. VIX: closed at 39.18 compared to 33.94 last Friday; 2. The euro/yen cross: closed at 127 compared to 129 last Friday; 3. The TED spread: closed at 98 bps compared to 97 bps last Friday.
All 10 major sectors finished the session lower led by financial and basic material. The CRB commodity index tumbled 3.9%. The US dollar was higher against most major currencies. Treasuries rallied with the yield curve flattened. The three-month US LIBOR was unchanged. The VIX index jumped more than 5 points. The market breath was negative on both NYSE and Nasdaq. The volume was neutral compared to last Friday.