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BOTTOM LINE: Overall, last week's market performance was very positive considering another rise in long-term rates, another Fed rate hike and an earnings warning from Dell Inc. The advance/decline line rose, almost every sector gained and volume was heavy on the week. Measures of investor anxiety were mostly lower. The AAII % Bulls rose for the week and is now at around average levels. The average 30-year mortgage rate rose to 6.31% which is 110 basis points above all-time lows set in June 2003 and the highest since June of last year. The benchmark 10-year T-note yield rose 9 basis points on the week as investors shifted from bonds to stocks and economic data were mostly positive. This also boosted small-caps, tech and cyclicals. The US dollar rose on the week, spurred by expectations of higher interest rates and optimism over US economic growth relative to that of other developed nations. Strength in the dollar and lower inflation readings led to more profit-taking in gold. Unleaded Gas futures have collapsed, falling almost 45% since September highs even as refinery utilization remains well below normal. Moreover, natural gas saw another inventory build even as a substantial amount of daily Gulf of Mexico production remains shut-in. Natural Gas plunged 12.5% for the week on this news and unseasonably warm weather. It is now down 22.8% from September highs. Natural Gas supplies are now about 3% above the five-year average for this time of the year heading into the winter. In my opinion, global energy demand destruction, which began a number of months ago, has accelerated meaningfully over the last couple of months and will send energy prices substantially lower over the intermediate-term. I continue to believe the major stock averages have seen their intermediate-term lows. I expect the S&P 500 to end the year strongly, finishing with around a 10% gain for the year.
*5-day % Change