The market advanced for the third consecutive session although it was well off its highs at the close. Both the Dow and the S&P 500 gained around 0.5% while the Nasdaq continued its recent strength and registered a gain of 0.9%. The news on the economic front was more or less in line with expectation. Initial jobless claims increased 4K to 372K in the latest reporting week. Continuing claims, on the other hand, climbed 36K to 3.104 million. It should be noted that while initial claims hold up relatively well during the current economic downturn period, the continuing claims continued to move higher and now are almost 700K higher than the bottom reached back in December 2006. In a separate report, the Q1 GDP was revised up to 0.9% from the previously estimated 0.6%. Almost all the increase was due to narrowing trade deficit, which shrank to an annual rate of $480 billion from almost $700 billion two years ago. Of course, a weak US dollar should continue to benefit the trade balance in the months ahead. Another interesting revision in the Q1 GDP report was a reduction in estimates for inventories. In fact, if it were not for a $14.4 billion cut in inventory, Q1 GDP would come at 1.5% instead. But the lean inventory level may be a positive factor for Q2 GDP as businesses need to increase their stockpiles.

Transportations and healthcares were among the biggest winners. Indeed, if there is anything that would benefit regardless of the direction of the oil price these days, it should be the transportation. The Dow Transportation Average closed at a new high for the year and was just inches away from a new historical high. Commodities were hammered as the CRB commodity index experienced its worst day in more than 2 months. It must be a very exciting day for oil traders as the commodity was down more than $2 in the morning then shot up by almost $5 within minutes following a rather dubious inventory report before seeing it finish the session lower by more than $4. It looks like oil may have reached its peak last week when it was traded above $135 per barrel. Certainly we hope that’s the case but we don’t want to bet on it(at least not yet). Treasuries continued to move opposite to equities and dived for the third consecutive session. The yields increased across the board with the curve flattened a bit. However, at around 4.10%, the treasury notes looked much more attractive compared to just one and a half month ago when it yielded less than 3.50%. The US was strengthened against the euro and the yen but was weak relative to several emerging market currencies.