Market Talk

US stocks rise on light volume, as Treasurys sink again, despite a plethora of dour news both here and abroad, and you can be forgiven if that raises questions in your mind about just how fundamental — and how speculative — these moves are.

DJIA gains 81 (0.7%) to 12279, S&P 500 rises 9 (0.7%) to 1319, Nasdaq Comp jumps 26 (1%) to 2757. NYSE volume is about 3.5 billion shares, well below the daily average this year of about 4.5 billion. It’s the Dow’s seventh gain in the last nine sessions, which is now back within hailing distance of its year high of 12391.

Treasurys meanwhile log their ninth consecutive losing session; the yield on the 10-year is up across those nine sessions, something that hasn’t happened since 1990.

Now, here’s the news that brought all that about: housing prices fell, again, consumer confidence is down, S&P downgraded Portugal and Greece, Congress can’t agree on a budget, and the fighting in Libya rages. There’s more, of course, but you get the picture. Normally, a combination like that would not be a winning recipe for stocks. But these are not normal times.

Despite all that troubling news, stocks rose, and a lot of people are increasingly straining to come up with reasons to explain the rise. Yes, we all know the old saw about stocks climbing a wall of worry. But there’s more going on here than old cliches.

Since the G7 put a lid on the yen, stocks have been going up and Treasurys have been going down. Call us crazy, but it seems like that G7 action was a clear signal to the markets that they could slap a fresh carry trade on the yen. That seems far more plausible to us, and fits the existing data, than this idea that suddenly stocks are the world’s safe haven, or consumers don’t mind high gas prices, or nobody wants to be short Friday’s jobs report.

Speaking of gas prices, crude oil closed at $104.80/barrel in more volatile trading driven by the civil war in Libya. Crude oil prices have been very volatile, but capped in a range between $100-$105/barrel. Meanwhile, gas prices are rising, not as rapidly as they were a few weeks ago, but still creeping higher, with the national average up to about $3.59.