US stock traders spent the early part of last week trying to understand the implications to global financial markets of the 3/11/11 Japanese earthquake and resulting tsunami.  What if 3 of the nuclear reactors in Japan were destroyed and the uranium fuel rods in these damaged plants overheat and melt, releasing large amounts of radiation into the surrounding areas?  Could radioactive plumes then travel 140 miles to Tokyo, exposing its 13 million citizens?  By the end of the week however, nuclear experts were cautiously predicting that some of the worst consequences may have been avoided.  After falling for the first 3 trading days of the week, the S&P 500 bounced back and gained ground on Thursday and Friday.  The stock index is up +2.2% YTD (total return through Friday 3/18/11) (source: BTN Research). 

The Federal Reserve sounded a note of optimism, albeit slight, on the state of the US economy last week.  The first sentence of their statement released last Tuesday (3/15/11) indicated that the "economic recovery is on a firmer footing and overall conditions in the labor market appear to be improving gradually."  The Fed also indicated that they believe their $600 billion bond buying program which began last November should continue until 6/30/11 as originally scheduled (source: Federal Reserve).

Congress may have successfully negotiated last Thursday (3/17/11) another 3 weeks of funding to keep the government functioning through 4/08/11, but Democrats and Republicans remain over $50 billion apart on the size of any additional budget cuts.  Both parties have agreed to $10 billion in cuts to current fiscal year spending plans, but Republicans continue to propose a total of $61 billion in cutbacks, an amount that Democrats and the White House are loathe to accept, believing that the negative impact to our economy of further budget cuts is too extreme (source: BTN Research).