Let us review the events of this shortened Post-Memorial holiday week.

The Markets opened and closed on Tuesday with a bang.  The major index' rose primarily on reports of a rise in Consumer Confidence.  Seemingly, Fed Chairman Bernanke's comments on "60 Minutes" where he said, that  "green shoots of economic revival are already evident," must have had some impact.  Investors also applauded and responded to news from the University of Michigan Consumer Confidence Index which rose to 54.9 in May from 40.8 in April.  That's nice, consumers are confident!

In other Tuesday news, the yield on the 10 year Treasury note increased to 3.493%, representing the highest level this year.   When the yield goes up, it means that investors are demanding increased returns in order to put their money in that investment.  Thus, the message was U.S. Government debt was less in favor to investors.

Still more news, the Case-Shiller index on housing prices came out showing home prices significantly worse than expected.  Yet, the market seemed to ignore this bit of news.

On Wednesday, The markets decided to give back almost all of Tuesday's gains.  The culprit was Moody's, the rating agency, which affirmed the U.S. AAA rating.  It's odd that an affirmation of a AAA rating sends shivers through investor's minds.

Thursday, advancing stocks outpaced declining stocks and the market headed back up again.  Solid demand at a Treasury auction eased concerns that demand was waning for U.S. debt, thereby allowing the U.S. to not have to pay higher interest on Treasury Bonds.

New homes sales rose 0.3%; Durable-goods orders rose 1.9% in April, the biggest jump in more than a year; a report on initial jobless claims showed last week's numbers fell by 13,000; of course there was more GM news regarding its bankruptcy; and the price of Oil closed above $65 a barrel for the first time since early November.

On Friday, the market waffled all day until the closing hour when it abruptly advanced.  Oil again went up to over $66 a barrel, and much of the rest of the news was lukewarm at best.  Throughout the week, the dollar declined against most major currencies, as a direct result of the ongoing debate over the fate of U.S. Treasuries and what might happen to that coveted AAA rating.

All in all, the news this week was mixed, the dollar was down, oil was up, and fear of future inflation increased primarily related to the credit rating of U.S. debt. 

 

Yet through all of this, consumer confidence increased to its highest level since last September.  What a perfectly complex environment in which to invest your had earned, and soon to be de-valued, dollar.  This is why we were, and still are, in cash, as we exercise patience waiting for all this turbulence to subsiide. 

Have a nice weekend.