Friends
Stocks continued their deliberate climb for the sixth day in a row today. The Dow Jones Industrial Average closed at 11,476 which is its highest level since September of 2008. The S&P 500 lost most of its gains by the close, but still managed to eke out a small gain of 1 point to close at 1241. That is quite a nice move from the 1180 level we closed at just a couple of weeks ago.
The Fed announced no change in policy today as QE2 continues as planned. The result continues to be a pummeling of the 10 year treasury note as rates rose to 3.45%. My goodness, we were just at 2.50% weeks ago. That is just a breathtaking move up in rates. Unfortunately for savers hoping short CD rates will rise, the short end of the curve (where the Fed is buying) remains at paltry levels. The yield curve is steepening, as we have been predicting, but the pace is a little worrisome. We want rates to rise for the right reasons, a growing economy, just not for the wrong reasons like a panicking bond market. No doubt some of the money leaving bonds is finding its way into stocks.
Retail sales numbers were fine this morning and it seems that most retailers (other than a disastrous Best Buy report) are having a decent Holiday season. The PPI number was a bit hot this morning but as we know, the Fed would like to see a little inflation.
We’ll keep an eye on the rest of the week and report to you on Friday.
