Any week bracketed by a day of lucky sevens (7/07/07) and Friday the thirteenth has got to be special for numbers obsessed Wall Street.
The numbers that matter this coming week will be the possible return to record levels on the Dow and S&P 500, both within striking distance after the past week's quiet but important move higher.
The Dow gained 203 points or 1.5% for the four-day holiday week, ending just 64 points below its record of 13,676 set on June 4. The Nasdaq gained 63 points or 2.4%, hitting a fresh 6-1/2 year high, and the S&P 500 rose 27 points, or 1.8%, ending just eight points shy of its all time high, also set four weeks ago.
"This is a classic stealth rally," says CNBC's Bob Pisani, who says stocks could revisit highs early in the week. Pisani said the market ignored the twin pressures of interest rates and oil prices and a number of stock groups broke out including retailers and homebuilders.
"A lot of people are betting we're getting better than expected GDP,” he said. “A lot of people are saying it will be closer to 3.0% for the second quarter."
Larry Kudlow agrees that the market is on a roll and the just-right economy is helping it. "We've got some good mojo working," he said. "Goldilocks is roaring." Kudlow says the economy is being led by business.
A burst of merger activity last week, including a big $26 billion Blackstone bid for Hilton, injected confidence back into a market that had been shuddering from worries about credit quality.
Other Market Action
Selling in Treasuries this week pushed the yield on the 10-year note to 5.195%. This past week, stocks shrugged off the moves in rates. "Should we get closer to or above 5.25% on the ten-year, you'll see stocks suffer a lot more than they have been.” says CNBC's Rick Santelli, from the Chicago futures pits. “I think that's the key."
But Santelli says the currency market is the one to watch, and that will be a clue to the action in bonds.
"The big story to watch next week, bar none, is the dollar,” he said. “What's going on here is the strength of the euro and high-yielding currencies vs. the dollar's weakness. Everybody I was talking to (Friday) was waiting to see how high a bid we could get on the strong employment data so they could sell the dollar," said Santelli.
"A weak dollar is not good for fixed income markets," he said. "It's easy to say the reason the dollar is weak is because the Fed is on hold and central banks in other parts of the world are raising rates. But I think it’s gotten to the point now that it's falling on the weight of the negative sentiment as well."
"What you want to think about is what the weak dollar will mean for their future purchases of dollar-denominated assets, generally and specifically Treasury securities, which had been a favorite of Asian central banks," he said, noting that China has made it clear it will veer away from the type of buying it historically has done in Treasuries.
For the week, the dollar fell 0.7% versus the euro, its fourth weekly decline. Year to date, the dollar is off nearly 3.0% against the euro.
In other markets, oil rose 3.0% for the week, ending at $72.81 per barrel. Gasoline also rose 3.0% and was 6.68 cents higher at $2.3096 per gallon.