The S&P 500 Index closed up 4.1% last week and is up 11.4% over the past 2 weeks. The Dow Jones Industrial Average topped 9,000 for the first time since January 2. One very positive sign we see is a marked decline in the % Volatility indicator, which is the percent of days in the last 60 days with market moves greater than 1%. The % Volatility indicator has plunged from its December 2008 peak in the mid-80’s to its current levels in the mid 40’s. Historically, a significant drop in this indicator has often preceded and/or coincided with a sustained market rally. Conversely, a significant rise in this indicator has often preceded and/or coincided with a sustained market decline.

The stock market (as represented by the S&P 500 Index) zoomed ahead by 7.0% last week as investors responded positively to the first wave of quarterly corporate earnings reports. While only 11% of major companies reported their quarterly earnings, 71% beat expectations. So far so good, but it’s possible that a series of negative surprises could also tank the market in coming weeks. New weekly unemployment claims are starting to slow, retail sales are improving, inflation is low and new housing starts are up. Is this long recession out of the woods? Read Mortimer Zuckerman’s article in the Wall Street Journal: The Economy Is Even Worse Than You Think.

Market & Economic Data

Following a bear market rally that lasted from March-June and bolstered investors’ spirits, the S&P 500 fell for the fourth straight week. Increasingly more indicators show that the long-awaited economic recovery is not imminent as many previously thought. Commodity prices have also tumbled.Oil plunged more than 10% last week while Treasury Bonds surged, an indication that investors see more recession ahead. Over the past year the S&P 500 Index has plunged as much as 49.6% as the black dashed line shows in the chart below. Investors are growing weary of the white-knuckle roller coaster ride in their portfolios. Are there better alternatives? Stuffing your money in your mattress is definitely not the answer!

Market & Economic Data