Stocks Extend Gains for 7th Straight Week

In its latest POMO, the Fed purchased another $7.3 billion in bonds from the Primary Dealers on Friday, which, of course, made buying yesterday's dip the right move for equity traders.

Stocks rallied sharply off a quiet beginning, with all major indices getting a diagonal lift throughout the day. The market has now overextended an already extended position, as new highs were hit in all the majors. Those calling for a pull-back thus far have been sorely disappointed and probably are feeling a bit embarrassed at doubting the power of the Fed and fiat money created out of thin air.

Leading the way were bank and computer chip firms after JP Morgan Chase (JPM) and Intel (INTC) both reported earnings better-than street estimates.

Investors took December retail sales (up 0.5%), capacity utilization (76%) and industrial production (+0.8%) as positive signs that the recovery was continuing apace. A higher-than-normal CPI, which came in at 0.5%, did little to contain the enthusiasm.

Dow 11,787.38, +55.48 (0.47%)
NASDAQ 2,755.30, +20.01 (0.73%)
S&P 500 1,293.24, +9.48 (0.74%)
NYSE Composite 8,174.12, +54.69 (0.67%)

Advancing issues far outpaced decliners, 3972-2547. There were 233 new highs and 112 new lows on the NASDAQ; On the NYSE, there were 234 new highs and 153 new lows, the lows dominated by Municipal Bond funds, which have been hard hit in the aftermath of Meredith Whitney's call that there will be hundreds of municipal defaults this year. Nobody seems to be doubting her as states and cities struggle with bloated budgets and slim tax receipts.

Volume was at its best level of the week, a fitting conclusion to a week characterized by high drama and low reactions.

NASDAQ Volume 2,030,708,125.00
NYSE Volume 5,228,476,000

Oil tacked on a 14 cent gain, to $91.54, but the precious metals were savaged again. Gold traded down $26.50, to $1,360.50, its lowest level in some months, while silver was whipsawed lower by 94 cents, coming in at $28.32. The level of complacency in all trading areas - outside of the muni bond complex - is stunning. There simply is no risk aversion, a recipe for disaster, which the Fed has so far been able to contain.