The Dow ended the week up 252, or 2.4%, at 10,860; the four-week streak is the longest since April’s market peak. The S&P 500 Index added 23, or 2.1%, to 1149, its highest close since mid-May.
Stocks continued to rise during September, putting this September on track to be one of the best on record. If you recall, I wrote an article at the beginning of the month indicating that historically September is normally a bad month. The rally continues an equity market pattern that seldom occurs; alternating months of approximately 5% or greater gains and losses. To wit, see the performance of the S&P 500 Index for various months YTD in the table below:
| February | 5.90% |
| May | (-8.2%) |
| June | (-5.4%) |
| July | 6.90% |
| August | (-4.7%) |
| September as of 9/24 | 9.50% |
There are not too many eight-month periods in history where there was such alternating gain and loss activity in the S&P 500 Index. Of course this condition is not limited to just US Large Cap stocks.
Economic indicators continued this past week to show an economy that is trying to hit bottom and begin to grow. Sales of existing homes rose 7.7% in August.
Gold hit new highs, exceeding the $1,300 per ounce level. The 10-year US Treasury Bond closed the week at a yield of 2.62%, up some from the 2.52% close last week.
We continue to believe that domestic high yield corporate bond funds provide the best risk-adjusted return potential in this market environment.
The question is can this market break-out of this trading range? We are optimistic that the last quarter of 2010 will be a good quarter and end up giving us a good year.
For additional information contact Richard B. Taylor.