The market registered a modest gain in the final session of the week. The S&P 500 finished the week with a gain of 2.3%. Renewed weakness in the dollar helped stocks overcome an early drop that followed a worse-than-expected University of Michigan consumer sentiment reading. The equity market has been hijacked by the dollar since early this year and this week is no difference. At some point, the link will be broken and those blindly betting on the dollar carry trade will be hurt.

The market finally had a correction and all three major indexes finished the session lower by around 1%. A sharp rise in the dollar was blamed as the main reason behind today’s drop. Economic news and corporate news, meanwhile, came in mostly better than expected. Initial jobless claims came in at 502K, the lowest reading since January. Continuing claims also dropped to the lowest point since March. Separately, the Treasury budget for October came in with a $176 billion deficit. According to CNBC, that is the steepest October definite on record.

Most major sectors finished the session lower led by energy and financials. The CRB commodity index was little changed. The US dollar was higher against most major currencies. Treasury yields decreased while bond price increased. The three-month US LIBOR was unchanged at 27 bps. The VIX increased more than 1 point. The market breath was negative on both NYSE and Nasdaq. The volume was heavier compared to the previous session.

The market resumed its advance on Wednesday and the Dow was finished at another high for the year. Broad-based buying in overseas markets amid strong economic data from Asia was the main reason behind today’s movements. It should be noted that gold price hit a record price in today’s trading.

Most major sectors finished the session higher led by financials and basic materials. The CRB commodity index moved up. The US dollar was higher against most major currencies. Treasury yields decreased while treasury price increased. The three-month US LIBOR was unchanged at 27 bps. The VIX index barely changed. The market breath was positive on both NYSE and Nasdaq. The volume was normal.

The market finished the Tuesday in a mixed fashion. The Dow, meanwhile, closed at a fresh high for the year. After yesterday’s huge gain, investors were a little cautious and reluctant to chase stocks. The strength in the dollar also dampened investors’ sentiment. It found support following the news that credit analysts at Fitch said Britain is the most likely of the major economies to lose its AAA credit rating.

About half of the major sectors finished the session higher led by healthcare and utilities. The CRB commodity index moved up. The US dollar was higher against most major currencies. Treasury yields decreased while treasury price increased. The three-month US LIBOR was unchanged at 27 bps. The VIX index dropped less than half point. The market breath was positive on both NYSE and Nasdaq. The volume was normal.

The market rallied sharply in the first session of the new week with all three major indexes closing higher by around 2%. The Dow is now back to the highs for the year while the S&P 500 has gained six sessions in a row. It is a day with little earnings or economic news. So why the market wants to go higher? I think the most fundamental reason is that the stocks are cheap compared to other asset classes. With so much money sitting on the sideline earning next to nothing, it is not illogical to expect some of them would move back to the equity market from time to time. Also, the G-20 meeting over the weekend echoed the FOMC meeting last week by promising cheap money in the months ahead. A liqudity driven market can keep moving higher as long as the liquidity isn't run out. Clearly, we are not there yet. Having said that, I do expect the market will face some sell-off every once in a while as investors keep digesting new economic data. The most important piece of upcoming data will probably be the holiday sales figure. Currently, most analysts are expecting a better-than-expected report. If that doesn't materialize, the market may face some challenge in early 2010. 

Most major sectors finished the session higher led by industrial and basic materials. The CRB commodity index rose 1.7%. The US dollar was lower against most major currencies. Treasury yields were mixed. The three-month US LIBOR was unchanged at 27 bps. The VIX index dropped 1 point. The market breath was positiveon both NYSE and Nasdaq. The volume was on the light side.