Our Weekly Report..How did we do?

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OVERVIEW ~ March 15 through 19 was a rather quiet week, a welcome respite from the ceaseless turmoil of markets moving first higher, then lower, then reversing again. The Dow Jones Industrial Average began the week at 10,624.69, then made minor improvements on the figure, adding from 0.2% to 0.4% each day until Friday. At the week’s end, unsurprisingly, investors found a few small bits of data to worry about. They also saw prices on various shares of stock that made the equities, for some investors, possibly worthy of selling. And the DJIA fell a mild 0.35%, ending the week at 10747.98.
Interest rates, meanwhile, remained quiet. The 10-year Treasury note yielded 3.702% at the beginning of the week and treaded water, end-
ing the week at 3.693%. That amounted to a 0.2% decline. The Freddie Mac average rate for their 30-year mortgage, measured Thursday through Thursday, rose from 4.95% the prior week to 4.96% on Thursday March 18.
Why the calm? There was little for investors to be unusually nervous about. Federal Reserve Board Chairman Bernanke also helped matters by promising, once again, that it would be several months before the Fed allowed short-term rates to rise very far above 0%.
FOCUS ~ Further, there were bits of data that tended to calm the nerves and suggest that the economy probably is heading toward a sustainable recovery. A simple example: A company that freights, flies and delivers a vast amount of the goods produced by this nation and purchased by consumers, reported that its fiscal third-quarter profit more than doubled year-prior earnings. As a major participant in the world economy, this company can likely be seen as something of a barometer. Its health and growth suggest that the world economy is improving.
The current yield curve is another matter of special interest. (The yield curve is generally defined by the distance between the yield on the 2-year Treasury note and the 30-year Treasury bond.) In February of this year, the gap stood at a record 2.926. On Monday, March 15, the gap had narrowed to 2.742, closer to where it stands when the economy has regained strength and borrowers and lenders both expect a reasonable but not excessive premium for long-term lending. (If the gap becomes either too high or too low, we can expect market forces to bring the gap back into balance as the economy improves.) The gap is indeed moving toward a more normal range, and it may decrease even more rapidly when the Fed ceases its downward pressure on short-term rates. Though the markets fear the moment when the Fed makes this change, a change in Fed policy may become unavoidable if the yield curve continues to narrow.