The market started the new month modestly higher following the best monthly performance since Apr 2000. For the week, the S&P 500 posted a gain of 1.3%, making it the seventh weekly gain during the past eight weeks. It is a week not short of negative headline news including the outbreak of the swine flu, a worse-than-expected GDP report and concerns over the results of the bank stress tests. However, there is a feeling on Wall Street that the first quarter could have seen the worst of the current recession and things will pick up during the second half of this year. Housing market condition and the health of the banking industry remain the key factors going forward.
Let’s take a look at the three key indicators: 1. VIX: closed at 35.30 compared to 36.50 yesterday; 2. The euro/yen cross: closed at 132 compared to 131 yesterday; 3. The TED spread: closed at 87 bps compared to 90 bps yesterday.
Most major sectors finished the session higher led by basic material and energy. The CRB commodity index climbed 3.0%. The US dollar was lower against most major currencies. Treasuries declined with the yield curved steepened. The three-month US LIBOR dropped 1 bps to 101 bps, the lowest since 2003. The VIX index dropped 1.2 points. The market breath was positive on both NYSE and Nasdaq. The volume was lighter compared to the previous session.

Daily comments will be omitted thanks to conflicts in travel schedule‏.

The market rose sharply on Wednesday following two days’ modest decline. All three major indexes finished the session higher by more than 2%. The biggest financial event for the session is the release of the Fed statement. For the first time since the beginning of the current recession, the Fed noted that the economic outlook has improved modestly. But it also hedged its optimistic outlook by saying that household spending would continue to be pressured by job losses, decreased housing wealth and tight credit conditions. It should be noted that it’s not just the US but several other major entities including Japan and China have seen stabilization in the economic activities during recent months. Record amounts of money supply will prove the current recession is far different from the one experienced 80 years ago. In a separate report, the first quarter GDP showed that the US economy fell 6.1%, worse than a 4.7% drop expected. However, personal consumption climbed 2.2% after dropping 4.3% in the fourth quarter, which was much better than expected. Fast shrinking in inventory was the main reason behind today’s worse-than-expected GDP figure. But re-building inventory means a potentially stronger recovery in the second half of 2009. 
Let’s take a look at the three key indicators: 1. VIX: closed at 36.08 compared to 37.95 yesterday; 2. The euro/yen cross: closed at 130 compared to 127 yesterday; 3. The TED spread: closed at 94 bps compared to 92 bps yesterday.
Most major sectors finished the session higher led by basic material and financial. The CRB commodity index climbed 1.8%. The US dollar was lower against most major currencies. Treasuries declined with the yield curved steepened. The three-month US LIBOR dropped 1 bps to 103 bps, the lowest since 2003. The VIX index dropped 2 points. The market breath was positive on both NYSE and Nasdaq. The volume was heavier compared to the previous session.

The market retreated modestly on Tuesday. A much-better-than-expected reading in consumer confidence was offset by concerns over the banking stress tests. According to the Wall Street Journal, Bank of America and Citigroup may need to raise billions more to satisfy the stress tests. In additional, several regional banks may also need additional funds. The news sent the futures sharply lower ahead of the opening bell. But for the second time in a row, the market managed to recover most of the early losses and moved into positive territory for most part of the afternoon trading. This kind of unusual resilience in spite of negative headline news indicates strength underneath the market. Having said that, we need to see how the market will perform tomorrow as the Fed is expected to conclude its 2-day Fed meeting and make a statement at around 2pm.  
Let’s take a look at the three key indicators: 1. VIX: closed at 37.95 compared to 38.32 yesterday; 2. The euro/yen cross: closed at 127 compared to 126 yesterday; 3. The TED spread: closed at 92 bps compared to 96 bps yesterday.
Most major sectors finished the session lower led by basic material and financial. The CRB commodity index declined 0.4%. The US dollar was lower against most major currencies. Treasuries declined with the yield curved steepened. The three-month US LIBOR dropped 1 bps to 104 bps, the lowest since 2003. The VIX index was little changed. The market breath was neutral on both NYSE and Nasdaq. The volume was on the light side.

The market started the new week in a downbeat note amid concerns over the swine flu, which has the death count in Mexico grow to about 150 people. Throughout human history, pandemics and epidemics have been a big threat to human lives. Even in modern history, such as early 20 century, millions of people lost their lives due to cholera, smallpox and measles. Fortunately, advances in health care in recent decades greatly reduce death tolls. In recent years, we have bird flue, Mad Cow disease, the West Nile virus and SARs. None of the above has escalated to global pandemics. Chances are the swine flu will be no different. In hindsight, when SARs were declared by World Health Organization as a global emergency in early 2003, it would be a great time to buy shares instead of selling.     
One bright spot in recent weeks is the meaningful improvements seen in the credit markets. LIBOR, which helps determine borrowing costs on about $360 trillion of financial agreements, dropped for 20 straight days, to 105 bps, the lowest since June 2003. The average rate on auto loans is 267 bps above one-month LIBOR, down from about 800 bps in December. Prices of AAA-rated prime-jumbo MBS has risen more than 20% since early March while rates for non-jumbo mortgage drop to 4.8%, the lowest since the 1970s. The yield spread on AAA debt backed by commercial mortgages has narrowed more than 360 bps since March 20 while yields on average junk bonds have narrowed more than 900 bps since February. We need to remember that it was the sharp deterioration in the credit markets during the late September last year that triggered a 25-percent drop in global equity market in early October and led to the global recession we are experiencing now. Therefore, it is worth paying close attention to the credit markets.
Let’s take a look at the three key indicators plus the iTraxx CDX composite spread: 1. VIX: closed at 38.32 compared to 36.82 last Friday; 2. The euro/yen cross: closed at 126 compared to 129 last Friday; 3. The TED spread: closed at 96 bps compared to 98 bps last Friday; 4. iTraxx CDX composite spread: closed at 583 bps compared to 580 bps in the previous week.
Most major sectors finished the session lower led by basic material and transportation. The CRB commodity index declined 2.1%. The US dollar was higher against most major currencies. It rose more than 5% against the Mexican Peso. Treasuries rose across the yield curve. The three-month US LIBOR dropped 2 bps to 105 bps, the lowest since 2003. The VIX index jumped 1.5 points. The market breath was negative on both NYSE and Nasdaq. The volume was lighter compared to last Friday