White House Extends Bush Tax Cuts

The market is rallying on the news that the White House has extended the Bush tax cuts and also extended unemployment benefits. I don't think that anyone thought it might not happen, given how late in the year it is. But the Administration also added a payroll tax deduction and some better treatment for business investments.

That has helped the S&P 500 gap to a new high for the year this morning, and all 10 economic sectors are higher so far. Industrials and technology are leading the action, while defensive utilities and healthcare are lagging.

The flight-to-safety trade that we have seen recently is being unwound today. The dollar is lower, gold is trading down, and Treasuries are being sold in favor of equities. The lower dollar is also helping boost most commodities.

The selloff in Treasuries has pushed yields on the 10-yr Note to a new multi-month high of 3.09%. While that may seem high relative to recent levels, remember that it was just back in April of this year that the 10-yr was at 4.0%. So I could see us trading back toward those levels if economic data continues to improve.

As for the volatility index (VIX), it is hitting fresh lows again at 17.57.

Trading comment: No change to my recent comments and outlook in terms of the market. Leading growth stocks continue to move higher, and the question is really whether sectors that have been lagging will play catch-up at all? I am not playing it that way, but I am watching things like financials to see if they can get moving. If financials start to move higher, this market could really get cooking. As it stands right now, the S&P 500 is up 10% on the year.

It's also nice to see Google (GOOG) quickly recapturing its 50-day average today.

long GOOG