Markets Closed Along Recent Highs as Volatility Hovered Lower

Wall Street ended a mixed session slightly higher with the Dow30 up 0.32% along with a 0.14% gain on the S&P500 while the NASDAQ moved lower by 0.19%. The three indices have now advanced for the fourth consecutive week and ushered in recent highs including a 2009 high on the S&P500. The index closed at 946.21, the highest level since November 5th, while the NASDAQ remains at its best levels since early October. Dow30 meanwhile remains the weakest of the three with failure to set a year-to-date high as weakness lingers in manufacturing and retail despite resurgence in financial firms. Overall, markets closed positive on the year, with gains ranging from 0.26% on the Dow to a significant 17.87% advance in the NASDAQ composite.

The big story of the week has been commodities, with oil surging above $72 a barrel while traders sold Treasuries with the 10-year yield surpassing four percent Wednesday before pulling back to a yield of 3.792% to close the week. The yield has risen significant since the early part of the year as risk appetite in equities increased. Fear also remains quelled with the CBOE Volatility Index closing below 30 for the sixth consecutive session, despite rising 0.04 to 28.15 into Friday’s close. Looking ahead, it remains to be seen whether the rally continues for a fourth month though there are signs that downside could be ahead. Mortgage rates have risen significantly over the past few weeks while the fall in the LIBOR-OIS spread has stabilized with the measure remaining above its June 5 low even as the three-month LIBOR rate has fallen to an all-time low of .6244%. Looking at the week ahead, indicators in the US that may move markets include Housing starts, inflation data, and security purchasing by foreign investors in the TIC Flows. Stronger dollar in the week ahead could also result in oil prices seeing further declines from a seven-month high which would dim the upswing in affected sectors.

[B]Yield on 10-year Treasury Bond[/B]