Week in Review: March 15

The DJIA reached new all-time highs every day this week through Thursday, before closing the week with a modest decline on Friday. The S&P 500 rose +0.7% and finished at 1,561, just 5 points from its all-time high. The Japanese Nikkei remains on fire gaining another +2.3%, which puts the index up +21% YTD in yen, but "only" +10% when converted back to dollars.

Ten year Treasury bonds dropped 5 basis points to yield around 2%.

FT: "Having led the world into the credit crisis, [the S&P 500] has led the world back out. Since the last high, as of Wednesday this week the S&P had outperformed the MSCI EAFE index, covering the developed world outside the US, by +37%, and the much vaunted BRICs (Brazil, Russia, India and China) by +42%. Its recovery has come despite a slump for industrial metals, whose prices gauge the health of the global economy. The S&P has beaten the Dow Jones-UBS metals index by +46% since its last high."

EU leaders agree with France and Italy on interpreting budget rules in a way that lets governments "invest" to restart economic growth. German Chancellor Angela Merkel, setting aside her long-standing demand for strict austerity, also is calling for more growth-oriented policies.

Fitch Ratings cut Italy's credit rating to BBB+ with a negative outlook. "The inconclusive results of the Italian parliamentary elections on February 24-25 make it unlikely that a stable new government can be formed in the next few weeks" according to Fitch. "The increased political uncertainty and non-conducive backdrop for further structural reform measures constitute a further adverse shock to the real economy amidst the deep recession."

Recent Fed stress tests of the 18 largest US banks showed 17 have the capital base to withstand stressful scenarios which includes a peak unemployment rate of 12.1%, a drop in equity prices of more than -50%, a decline in housing prices of more than -20%, and a sharp market shock for the largest trading firms. ALLY Financial - majority owned by Uncle Sam - failed.

ISI notes last week, equity mutual funds saw inflows for the tenth consecutive week. The YTD inflow is on track to be +$68 billion, the most in 7 years.

Retail sales jumped +1.1% in February, much more than expected. This puts the YoY change at +4.6%. Much of the gain was associated with higher gasoline prices as gasoline station sales soared +5.0%. Core retail sales (ex auto, gas and building materials) were also better than expected, rising +0.4%.

Industrial production posted strong gains at +0.7% for the month, but consumer confidence unexpectedly fell from 77.6 to 71.8.

The CPI inflation rate surged in February due to higher gas prices. It was up +0.7% for the month and +2.0% YoY. In another report, the U.S. PPI jumped +0.7%. This puts the YoY number at +1.7%.

It will be a light week for data with housing starts, existing home sales, and leading indicators being about it. The FOMC meets Tuesday and Wednesday. Analysts expect no changes in Fed policy and the $85 billion in monthly bond buying to continue at least through the summer. Bernanke will hold a press conference after the meeting.

Congratulations to Mitch Seavey the 2013 winner of the Iditarod, making him a five time winner and the oldest man to do it! He completed the 1,000-mile race in nine days, seven hours and 39 minutes. Ally Zirkel came in second for the second straight year, less than an hour behind Seavey.