It was a flat week for the S&P 500, though the Dow dropped by 1.2%. Year-to-date, however, the S&P is positive (+1.7%) and the DJIA negative (-3.9%). The NASDAQ continues to soar above the other indexes, up 16.6% year-to-date. Foreign markets are also doing well, due to their connection to commodities and the dollar.

The bond market continues to be volatile as rates are moving down again. Treasury yields have dropped, as the Fed stays aggressive on inflation: the current yield of the 10-year Treasury bond is 3.50%, compared to the June 10th close at 3.98%. There is a real concern of an impending wave of inflation, as well as higher taxes, due to concerns about federal spending. These issues are driving the bond market’s volatility and will continue to do so for the coming weeks.

Investors face a shortened week due to the 4th of July holiday. It is not short on data, though — the big numbers we are watching are consumer confidence, due out Tuesday; ISM data, due Wednesday; and unemployment, out on Thursday. Each of these series is important to consumer spending and will certainly drive the markets in the short-term. We predict they will be better-than-expected.