Good evening,

The Dow Jones Industrial Average briefly crossed above the 11000 level Friday for the first time in 18 months, marking another key milestone in what has been one of the strongest stock-market rebounds in history. It represents another big accomplishment for a measure that was below 7000 only a year ago. The Dow broke 11000 briefly in the last minutes of trade Friday, climbing to 11000.98, before ending at 10997.35. The move extends a rally thats lifted the Dow 4.11% in the first quarter and 5.15% in March. It comes as investors grow increasingly confident about the economic outlook ahead of the start of the first quarter earnings season, which kicks off Monday with Alcoa.

The stock markets fear gauge, the Chicago Board Options Exchanges volatility index, or VIX closed at its lowest point in 30 months after the Dow Jones Industrial Average flirted 11000. The index ended Fridays session at 16.14 marking the lowest close since October 2007. The VIX tracks prices that investors are willing to pay for options on the Standard & Poors 500-stock index, often to protect themselves against declines in stocks. As a result, the VIX tends to move up when stocks move down and vice-versa. While the VIX has historically traded in the teens, it popped above 80 in late 2008 in the weeks after Lehman Brothers filed for bankruptcy. Since then, the VIX has steadily drifted lower and has closed below 17 on nine days so far this year.

Gold futures reached a four-month high as a downgrade for Greece refreshed concerns about European debt and the global economic recovery. Most-active June gold rose $9, or 0.8%, to settle at $1,161.90 an ounce after hitting $1,165.80, its highest point since Dec. 8. We believe continued concerns over Greeces financial situation, coupled with a lack of attractive investment alternatives due to continuously low interest-rate levels both in the U.S. and the euro zone, should keep interest in gold high and should support the gold price.

U.S. economic news

Consumer spending shows signs of rebound

Retailers reported faster-than-expected sales growth. According to Retail Metrics, same store sales climbed more than forecast. The International Council of Shopping Centers added to the upbeat retail news, reporting that chain store sales surged 9.0% in March, in line with the groups expectations of 8% to 10% growth. It was the fourth consecutive monthly gain, the largest since March 1999. The gain was boosted by an earlier Easter holiday, which accounted for about half the increase. The March increase was broad based, as most retailers met or topped estimates.

Recovery in service sector gains steam

The Institute for Supply Management reported that its index of nonmanufacturing activity rose to 55.4 in March, from 53 in February. A jump in new orders drove the gain. Anything over 50 represents expansion. The ISM also said 14 of its 18 sectors reported that business expanded in March.

Unlike this past week where there was barely any U.S. economic data on the calendar, the coming week will be full of market moving releases. We start off with the trade balance followed by retail sales, consumer prices, the Beige Book report, jobless claims, the Empire State manufacturing survey, the Treasury International Capital report, industrial production, the Philly Fed survey, housing market data and the University of Michigan Consumer Sentiment report. Given the sharp rise in retail sales reported by the International Council of Shopping Centers and the Redbook survey, there is a very good chance that the data from the Census Bureau will be strong as well. Overall, we believe that next week’s economic reports should be positive after a week of cautionary comments from Fed officials.

I wish you all a great weekend.