The market retreated on Friday with all three major indexes off by around 2%. But it still managed to post a third straight weekly gain. The Dow is up 6.8% and the S&P 500 is up 6.2% for the week. Month-to-date, the benchmark S&P 500 is up 11%, on track to have the best monthly performance in 18 years. Year-to-date, however, the S&P 500 is off by nearly 10% following a 38.5% drop in 2008. Thirteen CEOs of the nation’s biggest financial institutions met with President Barack Obama today at the White House. The meeting was described as “engaged and attentive”. Several bankers stated after the meeting that their banks would retain the TARP funds until the industry as a whole finishes the stress test. The results of the stress test are expected to be available by the end of April. At this point, I expect most banks if not all will pass the test.
Let’s take a look at the three key indicators: 1. VIX: closed at 41.04 compared to 40.36 yesterday; 2. The euro/yen cross: closed at 130 compared to 134 yesterday; 3. The TED spread: closed at 110 bps compared to 109 bps yesterday.
All 10 major sectors finished the session lower led by basic materials and financial. The CRB commodity index dropped 2.4%. The US dollar was higher against most major currencies. Treasuries were mixed with the yield curve steepened. The three-month US LIBOR dropped 1 bps to 122 bps. The VIX index was little changed. The market breath was negative on both NYSE and Nasdaq. The volume was lighter compared to yesterday.

The market closed sharply higher on Thursday with all three major indexes advancing more than 2%. Several better-than-expected earnings reports along with a satisfactory Treasury auction helped attract buyers into the market and sent the S&P 500 to the best level in six weeks. Similar to yesterday, most of today’s gain happened during the final hour of trading, indicating buyers were not eager to take profits as they did in the previous rallies. Also, the broad market was able to make progress without the participation of the financial sector, showing broad interests to the recent rally. Having said that, caution is still warranted as the market has advanced well over 20% in less than three weeks and some quarter-end window-dressing should be expected in the next few sessions.
Let’s take a look at the three key indicators: 1. VIX: closed at 40.36 compared to 42.25 yesterday; 2. The euro/yen cross: closed at 134 compared to 133 yesterday; 3. The TED spread: closed at 109 bps compared to 105 bps yesterday.
All 10 major sectors finished the session higher led by transportation and technology. The CRB commodity index rose 0.6%. The US dollar was mixed against most major currencies. Treasuries gained modestly. The three-month US LIBOR was unchanged at 123 bps. The VIX index dropped 2 points. The market breath was positive on both NYSE and Nasdaq. The volume was similar to yesterday.

The market had a roller coaster ride on Wednesday but still managed to post a modest gain. The Dow was up more than 180 points in the first 90 minutes and down as much as 110 points just past 3pm before surging 200 points during the final hour of trading. Much of the early gain can be attributed to better-than-expected durable goods orders and new home sales reports. After dropping for six consecutive months, durable goods orders for February unexpectedly increased 3.4% while economists were looking for a further decline of 2%. New home sales also came as a surprise. It increased 4.7% month-over-month to an annualized rate of 337K and the market consensus was calling for a decline to 300K. Combining the two early upbeat reports from the housing front, all data related to that sector for February have shown some sign of stabilization. In general, most economic reports released so far were not as bad as many had feared. However, another threat to the market moving forward may start to emerge. That is, investor appetite for government debt is waning. The Dow plunged over 200 points during the mid-day after a disappointing auction of 5-year Treasuries. In Britain, a similar auction of Gilts or British debt securities actually failed due to lack of enough buyers. Most of the recent government initiatives are going to rely on public debt financing. If investors lose confidence in the ability of government to repay the debt, interest rates will soar and prospective of economic recovery can be in jeopardy. For now, it’s still too early to make a judgement but that’s something worth paying attention to.  
Let’s take a look at the three key indicators: 1. VIX: closed at 42.25 compared to 42.93 yesterday; 2. The euro/yen cross: closed at 133 compared to 132 yesterday; 3. The TED spread: closed at 105 bps compared to 103 bps yesterday.
Most major sectors finished the session higher led by financials and consumer cyclical. The CRB commodity index dropped 1.1%. The US dollar was mixed against most major currencies. Treasuries were lower with the yield curve steepened. The three-month US LIBOR was unchanged at 123 bps. 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 gave back some of the gains from the previous session. At close, all three major indexes were off between 1.5% and 2.5%. For most part, the retreat was expected considering the size and the speed of the recent rally, which by some measure is the largest since 1938. In addition, investors usually don’t want to make big bets ahead of important economic data release. We are going to get Durable Orders, New Home Sales, Revised Q4 GDP, Personal Income and Personal Spending reports starting from tomorrow. One encouraging sign in the market is that although most major indexes hit new lows in early March, intra-day price movements didn’t spike much higher as they did during last October or November, indicating the possibility for a more sustained rally this time. The Dow moved on average 700 points a day in October. The figure dropped to around 500 points in November and 370 points in December. The intra-day volatility peaked on October 10th and 13th, each of which saw the index move by more than 1000 points during the day. Entering into this year, the Dow moved on average around 300 points a day and it moved only 400 points in the day after touching the recent bottom. Even in percentage term, the recent intra-day movements were lower compared to October and November.  
Let’s take a look at the three key indicators: 1. VIX: closed at 42.93 compared to 43.23 yesterday; 2. The euro/yen cross: closed at 132 compared to 133 yesterday; 3. The TED spread: closed at 103 bps compared to 103 bps yesterday.
All 10 major sectors finished the session lower led by financials and consumer cyclical. The CRB commodity index dipped 0.3%. The US dollar was higher against most major currencies. Treasuries were modestly lower. The three-month US LIBOR rose 1 bps to 123 bps. The VIX index was little changed. The market breath was negative on both NYSE and Nasdaq. The volume was lighter compared to yesterday.

The market enjoyed one of the best performances in history on Monday. Fuelled by an 18% rally in the financial sector, the S&P 500 rose 7.1%, making it the fourth-biggest gain since the 1930s. All of a sudden, investors seemed to like Treasury Secretary Timothy Geithner’s plan of removing banks’ distressed assets from their balance sheets. The plan was initially announced on Feb 10 and all three major indexes posted a loss in excess of 4% on that day. So what causes the sudden change in investor sentiment? For starters, I think too much hope had been placed before the announcement of the original plan in February. Therefore, disappointments followed immediately when investors thought they didn’t get enough details from the plan. Second, the selloff in stocks following the Feb 10th announcement reflected extreme pessimism among investors. For example, the financial sector dropped more than 40% in less than a month following the original announcement, making it as if all banks were going to be out of business tomorrow. But profit forecasts from several major banks showed that things were not as bad as some had feared. Driven by fear and hope, the market has taken a round-trip during the past six weeks and almost returns to where it was before the announcement of the plan. Looking ahead, I believe the housing market will continue to be the key to watch. For the second time in less than a week, another piece of positive news came from that front. Existing home sales in February unexpectedly rose 5.1% month-over-month to an annual rate of 4.72 million while economists were calling for a drop to 4.45 million. Because the figure hasn’t reflected the increase in the first-time buyer tax credit announced in mid February, we may see even better sales numbers in the months ahead.  
Let’s take a look at the three key indicators plus the iTraxx CDX composite spread: 1. VIX: closed at 43.23 compared to 45.89 last Friday; 2. The euro/yen cross: closed at 133 compared to 130 last Friday; 3. The TED spread: closed at 103 bps compared to 102 bps last Friday; 4. The iTraxx composite spread: closed at 755 bps compared to 791 bps in the previous week.
All 10 major sectors rose sharply led by financials and energy. The CRB commodity index rose 1.5% and closed at the highest level in more than 3 months. The US dollar was lower against most major currencies. Treasuries were modestly lower. The three-month US LIBOR was unchanged. The VIX index dropped 2 points. The market breath was positive on both NYSE and Nasdaq. The volume was on the heavy side.